TAILIEUCHUNG - Foreign Account Tax Compliance Act (FATCA)

The level of costs will vary substantially between the alternative industry segments, and also between individual managers in each segment. It will also depend on the marketing route used by the AIFMs (passport or PPR), especially for non-EU AIFMs. The one-off and ongoing compliance costs for non-EU AIFMs using the PPR route will be much lower than those of non-EU AIFMs using the passporting route and for EU AIFMs, whatever the route. The costs therefore need to be carefully analyzed on a case-by-case basis. Investors in existing funds at the final date of transposition or in funds to be launched afterwards. | cutting through complexity TAX Foreign Account Tax Compliance Act FATCA f Implications for Funds Overview of FATCA Documentation The . government intends to combat tax evasion by . persons more intensively. The Foreign Account Tax Compliance Act FATCA which was enacted into law on 18 March 2010 will bolster the . government s arsenal and will make it more difficult for . persons to hide income and assets. For investment funds this translates into new withholding tax and reporting obligations which have the potential to dramatically change the way funds currently operate. FATCA provisions are applicable to a wide range of foreign financial institutions FFIs including investment funds and require the documentation of all investors in order to identify those that are . persons. Under FATCA a 30 withholding tax is applied on any payment from . sources interest dividend or sales proceeds made to an investment fund unless the fund enters into a disclosure agreement with the . Treasury whereby it agrees to Identify . investors Comply with verification and due diligence procedures Perform annual reporting Deduct and withhold 30 from any payment made by the fund to inadequately documented investors and Comply with requests for additional information. Who is impacted Funds invested in the . market including but not limited to funds of funds exchange-traded funds hedge funds private equity and venture capital funds other managed funds commodity pools and other investment vehicles. Withholding Reporting Notice 2010-60 and Notice 2011-34 set forth the general framework for implementing FATCA. Final regulations are still to come. Highlights FATCA provisions apply as from 2013 on payments of interest dividend or sales proceeds on . securities Funds agreeing to participate in the programme will face enlarged due diligence and documentation requirements In the absence of an agreement with the IRS the fund will suffer a 30 withholding tax on interest .

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