Information on FATCA legislation

October 19th, 2013

The Foreign Account Tax Compliance Act (“FATCA”), is a U.S. law that will enter into force on July 1, 2014. The financial reporting requirements FATCA imposes may affect the business of the Entity and the services that IMC International Management & Trust Company N.V.  (“IMC”) currently provides to the Entity, the details of which we wish to share with you below.


What is FATCA?

FATCA is a U.S. law introducing registration and reporting obligations for non-U.S. entities, the aim of which is to collect the appropriate amount of tax from all U.S. persons. Failure to comply with FATCA requirements may result in a 30% withholding on certain U.S. source payments.


Which entities fall in the scope of FATCA?
FATCA will apply to all Foreign Financial Institutions (“FFIs”) and their affiliates and also to Non-Financial Foreign Entities (“NFFEs”). A non-U.S. entity (like the Aruban A.V.V. or N.V.) will qualify as a FFI under FATCA if it is a (a) Custodial Institution, (b) Specified Insurance Company, (c) Depository Institution, (d) Investment Entity or, depending on applicable law, (e) Holding Company acting as holding company of one of the institutions mentioned under (a), (b), (c) or (d). A non-U.S. entity which does not qualify as an FFI will be classified a NFFE and is for now exempted from reporting duties, as it will not be required to register with the U.S. Internal Revenue Service (“IRS”).

How can you avoid the 30% withholding?

FFI’s which would like to avoid the 30% withholding are required to register with and report to the IRS certain information about specified foreign financial assets held by U.S. taxpayers. Please note that all FFI’s have to register to the IRS, also if there are no U.S. beneficiaries involved. FFI’s in countries which sign a Model 1 Intergovernmental Agreement with the U.S. (the “Model 1 IGA”) can comply with FATCA by reporting to their local tax authorities rather than directly to the IRS. At this time it is not sure if and when Aruba will opt for a Model 1 IGA.


Under FATCA (and the Model 1 IGA), all FFIs are obliged to:

  •   Register their FFI status via the IRS online FATCA Portal;
  •  Identify U.S. accounts;
  •  Comply with verification and due diligence procedures specified by the IGA;
  •   Annually report on U.S. accounts; and provide further information on request.


What steps to take and what do you need to do?

The first step towards FATCA compliance of any entity, wherever in the world it is based, is to determine its FATCA classification.

IMC can do this initial classification based on the information available to us regarding the Entity. If needed, we will reach out to collect more information. After the initial classification process is done, we will inform you whether, based on our review, the Entity is a FFI or not.

Should the Entity be initially classified as a FFI, we will contact you again to explain the next steps in the process.

In case of any questions regarding this subject, please contact Marc Ingwersen.