Public Notice On FATCA

FATCA – FOREIGN ACCOUNT TAX COMPLIANCE ACT

On 18 March 2010, the US government enacted FATCA, to combat tax evasion by US persons holding investment (i.e. Savings and Investment) outside the United States.   FATCA requires FFIs (Foreign Financial Institutions) to report directly to the U.S IRS (Internal Revenue Service), information on assets held by US taxpayer.

From July 1, 2014, Foreign Financial Institutions (FFIs) are expected to comply with FATCA.   West Coat Co-operative Credit Union Limited like other financial institutions has registered with the U.S IRS.

What is a U.S PERSON?

  • All US citizens.  An individual is a citizen if that person was born in the United States or if the individual has been naturalized as a US citizen.
  • A lawful resident of the U.S. (including a U.S. green card holder).
  • Standing instructions to transfer funds to an account maintained in the U.S. or directions regularly received from a U.S. address.
  • An “in care of address or a ”hold mail” address that is the sole address with respect to the client or
  • Power of Attorney or signatory authority granted to a person with a U.S. address.
  • A partnership created or organized in the United States or under the law of the United States or of any State.
  • A corporation created or organized in the United States or under the law of the United States or of any State.

You are a ‘tax resident’ of the United States.  You can become a tax resident under two rules:

    • 1) The ‘substantial presence test’.   This is a ‘day count test and based on the number of days you are in the US over a three year period.
    •  2) The ‘green card’ test.  A person who has obtained a ‘green card’ has been granted the right to lawful permanent residence in the United States.

Accounts of U.S PERSONS to be reported

WCCCU is responsible to identify members, depositors and entities who are U.S. persons and to report annually to the IRS individual US persons with accounts balance of US$50,000 and over,and U.S entity with accounts balance of US$250,000 and over.

HOW WILL WCCCU BE AFFECTED IF IT FAILS TO COMPLY?

If WCCCU fail to comply, it will be taxed and unable to conduct transactions with U.S Banks through correspondent banks (i.e. sending and receiving money through wire transfers and drafts) will be affected.  Also, WCCCU may be faced with legal and reputational risks and penalties.

INDIVIDUALS AND ENTITIES WHO FAIL TO COMPLY

If members, depositors or entities who are US account holder refuses consent for WCCCU to pass its information to the IRS, it will be a ‘recalcitrant account holder’ and payments made by it, and accounts held by it, will be subject to a 30% withholding tax.

Source Income is defined as:

  • Interest payments, dividends, rents, salaries, wages etc.
  • Gross proceeds from the sale of U.S property that produces interest or dividends
  • Interest paid by foreign branches of U.S. Banks.
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