We would like to answer the following questions in order to clear up the most common doubts that you may have about FATCA regulations:
1. What is FATCA and what does it set out to do?
2. What companies are US Entities?
3. What companies have to fill in FATCA forms? If my company is not American or does not have United States shareholders, why do I have to fill in a FATCA form?
4. Which FATCA form must I fill in?
5. What is the TIN?
6. What must I answer in the W-8BEN-E form to the question in which I am asked to classify my company as Active or Passive?
7. What companies will the Spanish Tax Agency (AEAT) be sent information about?
8. What implications are there to my company’s being classified as Active or Passive?
9. May I have a copy of the FATCA form?
10. What happens if I refuse to fill in the FATCA form for my situation?
11. What are the main obligations stemming from FATCA for Financial Institutions with regard to their customers?
12. What products/accounts are affected by FATCA?
1. What is FATCA and what does it set out to do?
FACTA is the acronym of the Foreign Account Tax Compliance Act.
This is North-American legislation with worldwide scope that sets out to prevent tax fraud by United States taxpayers, both natural persons (US persons) and legal persons (US Entities) for income obtained beyond its borders. It affects both Natural and Legal Persons.
On 14th May 2013 Spain signed an Inter-governmental Agreement (IGA) with the United States to facilitate the introduction of FATCA. This agreement
came into force on 1st July 2014.
2. What companies are US Entities?
All those that meet any of the following requisites:
1. Companies incorporated in the USA.
2. Companies in which one or several US persons have holdings, controlling said company. A shareholder is considered to have control when he or she is the
direct or indirect owner of over 25% of the shares.
3. What companies have to fill in FATCA forms? If my company is not American or does not have United States shareholders, why do I have to fill in a FATCA form?
FATCA regulations oblige us to require
all companies to sign a FATCA form in which they accredit this status, whether these are US Entities (North-American companies or with controlling North-American shareholders) or not.
4. Which FATCA form must I fill in?
If yours is a North-American company: Form W-9
If yours is not a North-American company: Form W-8BEN-E
5. What is the TIN?
This is the Tax Identification Number, which is the federal taxpayers’ identification number in the U.S.A.. For legal persons, this is the EIN (Employer Identification Number).
If you have to fill in form W-9 but you do not yet have a TIN, put “Applied For” in the space reserved for the TIN.
6. What must I answer in the W-8BEN-E form to the question in which I am asked to classify my company as Active or Passive?
- Active companies: These are the ones complying with any of the options of Schedule II included in the form itself. The criterion of greatest use for you to classify your company is nevertheless the one stated in letter “a”, by means of which Active companies are considered to be all the companies which obtain most of their income from their commercial business. To do this they have to meet the following two requisites:
- For under 50% of the gross revenue generated by the company to be passive, i.e., not to stem from its own business activity but from other concepts such as rent through leasing, financial interest, etc
- For under 50% of the company’s assets to generate passive income, or for their purpose to be generating passive income.
- Passive Companies: The ones that cannot be classified as Active.
Should you have any doubts, you can opt for describing your company as Passive, and state whether or not this has North-American shareholders holding control of this (> 25% of shareholding structure)
7. What companies will the Spanish Tax Agency (AEAT) be sent information about?
Only about North-American companies, and also those which in spite of not being North-American are Passive and also have controlling American shareholders directly or indirectly holding control over these.
8. What implications are there to my company’s being classified as Active or Passive?
- In the event of your company not having North-American controlling shareholders, this classification does not have any consequences, as the only information sent to the AEAT tax agency will be on companies classified as Passive which also have North-American citizens or residents directly or indirectly holding control over these.
- In the event of your company having North-American controlling shareholders, FATCA classification does indeed entail consequences, since if this is a Passive company your information will be sent to the Spanish Tax Agency (AEAT).
9. May I have a copy of the FATCA form?
We would indeed advise you to keep a copy of the form that you send to us.
10. What happens if I refuse to fill in the FATCA form for my situation?
The law obliges Financial Institutions to consider the customer recalcitrant and to declare their accounts to the Spanish Tax Agency (AEAT), which will later send this information to the North-American IRS.
11. What are the main obligations stemming from FATCA for Financial Institutions with regard to their customers?
- To identify North-American customers in accordance with the procedures established in FATCA regulations.
- To annually give the Spanish Tax Agency (AEAT) the information on financial accounts of customers identified as North-American companies and non-American companies classified as Passive and which also have US Persons (citizens or residents) holding control over these. Later on the Spanish AEAT has to send this information to the Nort-American tax agency (IRS).
All financial institutions located in Spanish territory are covered by this norm.
11. What are the main obligations stemming from FATCA for Financial Institutions with regard to their customers?
El contenido de este documento proporciona información genérica sobre FATCA; si requiere asesoría fiscal especializada, le sugerimos que consulte con su asesor fiscal.
