Jean François de Clermont-Tonnerre

Hire Act & FATCA and its consequences within the banking environment

New HIRE Act
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The US HIRE Act (1/2)
On March 18, 2010 US President Obama signed the Hiring Incentives to Restore
Employment Act (the “Act”).
This new HIRE Act will impact Foreign Investment Vehicles and is likely to affect many tax
payers:
• Withholding Tax on Dividend-Equivalent Payments
• New Withholding Tax Regime
• Foreign Account Reporting
• Annual PFIC Reporting
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The US HIRE Act (2/2)
• Withholding Tax on Dividend-Equivalent Payments
Dividend-equivalent equivalent payments made to foreign persons on or after September
14, 2010 will be subject to a 30% U.S. withholding tax (applied to the gross amount)
Accordingly, a 30% withholding tax may be imposed on an amount which, under the terms
of the applicable instrument, exceeds the actual net payment made to the foreign person.
• New Withholding Tax Regime
• Foreign Account Reporting
- Foreign Financial Accounts (which includes interests in FFIs)
- Foreign issued stock, securities or derivatives
This is in addition to the FBAR reporting of foreign bank and financial accounts.
• Annual PFIC Reporting
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FATCA
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The FATCA
On March 10, 2010, the U.S. senate passed the Tax Extenders Act (H.R. 4213) of 2009. The
Act includes an updated proposal for a new law to prevent tax evasion by U.S. persons
and focuses on high net-worth individuals
(so-called “fat cats”). The act will be put in
force in 2013.
For which financial institutions will FATCA be
applicable?
FFIs
PFFIs
NFFEs
Under the new withholding tax regime, payments of “withholdable payments” to FFIs are
subject to 30% withholding tax.
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The FATCA
FFI (Foreign Financial Institution):
• Foreign Entity
• Financial Institution
1. Accept deposits in the ordinary course of a banking or similar business
2. Holds financial assets for the account of others as a substantial portion
of its business
3. is engaged (or holds itself out as being engaged) primarily in the
business of investing, reinvesting or trading in securities, partnership
interests, commodities or any interest in such securities, partnership
interests or commodities.
NFFE (Non Financial Foreign Entity):
Any foreign entity that is excluded from the definition of a financial Institution
PFFI (Participating FFI):
Entering into an FFI agreement with IRS, under which the FFI agrees to undertake
certain due diligence, reporting, and withholding responsibilities
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The FATCA
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Banking challenges
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The new environment
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The issues
• Complete exit from the US Market?
No US Clients
No US securities
• Continue with QI agreement?
• Regulate part of a Group ? The problem of “Expanded affiliated group”
If a FFI is part of a group of companies that include another FFI which has signed
the agreement with IRS, obligation to adhere for the rest of the group
• Compatibility with Swiss banking secrecy ?
FINMA has not provided its position.
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The Alternative
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Hottinger & Partners position
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Segregated Business- US/non US – SEC regulation
• In 2009 HPSA decided to set up an entity in Luxemburg dedicated to US business. An
SEC Entity regulated and registered in different States (CA,FL,NY..)
• The Entity is a “PSF” (professionnel du secteur Financier) regulated by Luxembourg
Financial Authorities. The entity can:
Manage Assets on a discretionary Basis.
Open accounts for clients.
• In order to avoid Consolidation issues the entity is controlled by its Managing Partners,
directly.
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The next Step
• HCTG Luxembourg entity will be in a position to become FACTA compliant
immediately.
• HCTG Luxembourg will be able to act as simple asset manager or/and custodian of
assets for US clients.
• Of Course this setup does not imply that Hottinger Group will not choose to become
FATCA compliant as a group.
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Your contacts
• Jean François de Clermont-Tonnerre
Jf.clermont-tonnerre@hottinger.com
Tel: + 41 794 151981
• Fabien Gaglio
Fabien.gaglio@hottinger.com
Tel: + 44 771 5420893
• Laurent Vernadat
Laurent.vernadat@hottinger.com
Tel : + 33 603 473046
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