FATCA Regulations on Cross Border Financing - IPBA 2012

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Withholding on U.S. Equity Swaps‣ Prior to March 18, 2010, the income of foreign taxpayers that entered into equityswaps (respected as notional principal contracts) on U.S. companies was treatedas foreign source income and was not subject to U.S. withholding tax‣ The IRS was concerned about the abusive use of equity swaps by foreigntaxpayers to avoid U.S. withholding on U.S. source dividend income‣ New Section 871(m) treats imposes dividend withholding tax on dividendequivalents. Dividend equivalents are:• Substitute dividend payments on securities lending and repurchasetransactions that directly or indirectly are contingent upon or determined byreference to the payment of U.S. source dividend;• Payments made on a “specified notional principal contract” that arecontingent upon or determined by reference to the payment of a U.S. sourcedividend; andgsblaw.com 36
Dividend equivalents - continued• Substantially similar payments as specified in the regulations.– “Substantially similar” under the proposed regulations includes anypayment of a beneficial owner’s tax liability with respect to a dividendequivalent made by a withholding agent, and any payment, includingpayment of the purchase price or an adjustment to the purchase price,that is contingent upon or determined by reference to a dividend fromsources within the United Statesgsblaw.com 37
Page 1 and 2: FATCA Regu
Page 6: Key Withholding RequirementsWithhol
Page 9: Glossary of General Terms‣ Non-Fi
Page 12 and 13: Key Terms Related to “Foreign Fin
Page 14 and 15: Phased Implementation‣ On July 14
Page 16 and 17: FFI and NFFE Compliance Requirement
Page 18 and 19: 5-Step Procedure for Identification
Page 20 and 21: Private Banking Clients‣ Special
Page 22 and 23: Reporting on U.S. Accounts and Owne
Page 24 and 25: Procedures to Identify and Withhold
Page 26 and 27: Payors of Withholdable Payments Lia
Page 28 and 29: Updating Internal Systems‣ Payor
Page 30 and 31: Withholding Scenarios for FFIsSCENA
Page 32 and 33: Interaction with NRA Withholding Ru
Page 34 and 35: FATCA and U.S. Inc
Page 38 and 39: Notional Principal Contracts‣ An
Page 40 and 41: Specified Notional Principal Contra
Page 42 and 43: Liability of Withholding Tax‣ Wit

FATCA Regulations on Cross Border Financing - IPBA 2012

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