Impact Of FATCA On Bermuda Entities

This publication provides a brief overview of the expected impact on entities established in Bermuda of (a) the foreign account tax compliance provisions ("FATCA") of the Hiring Incentives to Restore Employment Act, 2010 of the United States of America (the "US"); and (b) equivalent rules implemented in relation to United Kingdom taxpayers. However, this publication is not intended to be a substitute for legal advice or a legal opinion.

1.Background

FATCA is a US federal law that aims to reduce tax evasion by US persons. FATCA has significant extraterritorial implications and, most notably, requires foreign financial institutions ("FFIs", discussed further below) to report information on accounts of US taxpayers to the US Internal Revenue Service ("IRS"). If an FFI fails to enter into the necessary reporting arrangements with the IRS, a 30% withholding tax is imposed on US source income and other US related payments of the FFI.