Survey reveals industry unprepared for FATCA
Companies are still ‘seriously unprepared’ for the FATCA rules which will come into force in January next year, a new survey by Thomson Reuters has revealed.
The survey of 200 risk, compliance, audit, and legal practitioners globally showed half are unsure of the impact FATCA will have on their firms.
About 60% said they expect the requirements of the US tax regime to have an effect on their bottom line, but a further 60% said they have not set aside a specific budget for dealing with the costs of implementation.
FATCA, or the Foreign Account Tax Compliance Act, is designed to improve tax compliance for financial assets held by US citizens in bank accounts and other vehicles outside the US.
However, 8% of those surveyed said FATCA will have such a significant impact on their US operations that they are closing their businesses to US citizens.
Under FATCA, all financial institutions – US-domestic and foreign – must classify account holders as either US or non-US based, and foreign financial institutions (FFIs) are expected to identify US account holders and disclose their balances, receipts, and withdrawals to the US Internal Revenue Service (IRS).
More than a third of respondents said FATCA had been discussed only once or never at all at board level. Thomson Reuters said 43% of firms are still unsure of their strategic approach for FATCA, and 51% of firms with a US legal entity are unsure of what approach to take in relation to US customers
“The survey has shown a significant divide in the extent and state of preparations being undertaken for the new FATCA rules,” said Mark Schlageter, managing director for governance, risk and compliance at Thomson Reuters.
“While this has been driven predominantly by continued lack of clarity about what the final practical requirements will entail, financial firms must ensure they fully understand the detailed impact the final FATCA requirements will have on their businesses.”
According to some estimates FATCA will will cost $500bn globally to implement and $10bn a year to run, and will bring in $1bn of revenue to the IRS annually. The majority of the costs will be shouldered by non-US institutions.
In its latest updated proposals, the US Treasury said some foreign countries will be able to comply with the Act by collecting required financial data and forwarding it to US authorities.
Under its original proposals, financial institutions, not their governments, were tasked with collecting and reporting the data.
Further guidance on this bilateral agreement between the US and other countries is expected as soon as 15 June.
This article was furst published on Investment Week