FATCA, a new law for the Bank, its clients and counterparties



The Foreign Account Tax Compliance Act (FATCA) is a U.S. law which provides for an annual disclosure to the U.S. Tax authority (IRS – Internal Revenue Service) of accounts held by U.S. taxpayers outside the United States.


This legislative framework relates to « U.S. persons », being U.S. citizens or persons resident in the United States. FATCA requires financial institutions to transmit following information to the IRS on a yearly basis:

  • the identity of the account holder;
  • its account balances, financial income;
  • in the future: the gross proceeds of the sale of securities.

The first reporting, in 2015, will bear on 2014. Thereafter, this reporting will take place on annually. This reporting will also pertain to the accounts of U.S. legal entities or of patrimonial entities which are owned by U.S. taxpayers.

Mandatory declaration for all U.S. taxpayers

Existing U.S. tax legislation compels U.S. taxpayers to file their tax return irrespective of their place of residence. It should be noted that FATCA will have no impact on the reduced tax rates resulting from international tax treaties for the benefit of eligible clients.

FATCA in the Belgian legislation

In many cases, FATCA will be implemented through Intergovernmental Agreements (IGA's) being negotiated. The Intergovernmental Agreements allow for and make compulsory the transmission of tax and banking information between countries. A good number of countries including Belgium and a majority of European countries are opting for the intergovernmental approach. These countries are committing to making FATCA compulsory in their national legislation. In those countries which are not opting for an Intergovernmental Agreement, FATCA will be implemented through a direct agreement between the IRS and each financial institution. Non cooperative financial institutions will be subject to penalties.

Consequences of FATCA for BNP Paribas Group

BNP Paribas will be FATCA compliant in all countries where local law will either allow it or make it compulsory with the view to obtaining the status of “participating financial institution”.
BNP Paribas is taking appropriate measures in order to be FATCA compliant in all business lines and countries worldwide by July 1, 2014, in order to best support its customers.

Consequences of FATCA for clients and counterparties

Clients who may be within the scope of this legislation were contacted by BNP Paribas Fortis, as well as legal entities including:

  • legal entities with a U.S. ultimate beneficial owner;
  • U.S. corporations;
  • non-U.S. Foreign Financial Institutions.

During the on-boarding process, BNP Paribas Fortis will be collecting information allowing to identify American residents and citizens (including persons with a dual citizenship) who will have to provide a Taxpayer Identification Number towards the IRS. Patrimonial entities will have to identify their American ultimate beneficial owners.

Register with the IRS

Our counterparties and clients which are financial institutions (banks, life insurance companies, mutual funds, etc.) may register as a participating entity with the IRS. This will obtain a Global Intermediary Identification Number (GIIN) from the IRS. It allows financial institutions which are based in countries not covered by an Intergovernmental Agreement to avoid the FATCA withholding tax on U.S. source income from financial products. This registration is also required by intergovernmental agreements for identification purposes.
If a financial institution is non-participating from a FATCA perspective, BNP Paribas Fortis will have the obligation to levy a 30% withholding tax on payments from U.S. source and will have to report to the IRS the total amount of payments made during the year.
BNP Paribas Fortis will contact certain counterparties to incorporate appropriate FATCA clauses in their master agreements and mutual arrangements, in order to avoid undue application of the penalties contained in the law.