ARTICLE · 09 SEPTEMBER 2012

FATCA: update on US reporting and withholding requirements and the implications for Australian funds

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Funds that do not become a participating FFI under FATCA will expose their US sourced payments to a 30% withholding tax.

AustraliaTax

By Fiona Smedley and Matthew Farnsworth

In brief

The Foreign Account Tax Compliance Act (FATCA) is US legislation which is designed to enable the US Internal Revenue Service (IRS) to obtain information about offshore accounts held by US taxpayers.
FATCA generally requires a foreign financial institution (FFI) to report to the IRS certain information on offshore financial accounts held by US taxpayers. A FFI that is non-compliant will generally be subject to a 30% withholding tax on US sourced payments made to the FFI.
Many Australian funds will not be able to rely on the exemptions in the proposed regulations implementing FATCA.
FFIs in Australia, including fund managers, should inform themselves about the implications of FATCA and continue to monitor developments.

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