FAQ

    • Q: What is the Foreign Account Tax Compliance Act, or “FATCA”?
    • A: “FATCA” is the common name frequently used to refer to provisions in the Hiring Incentives to Restore Employment Act of 2010 that, beginning July 1, 2014 (subject to transition relief released in May 2014), require 30% withholding on certain U.S.-related payments to foreign financial institutions and other foreign entities unless the payor can determine that the payee is exempted from FATCA withholding.
    • Q: What is the objective of FATCA?
    • A: FATCA’s objective is to reduce tax evasion by U.S. persons with respect to income from foreign financial accounts and assets held outside the United States by imposing a 30% withholding tax on certain U.S.-related payments to foreign financial institutions and other foreign entities unless they report their U.S. account owners and owners to the IRS or otherwise meet a specified exception.
    • Q: Which forms are required to ensure compliance with FATCA regulations?
    • A:
      • IRS Form W-9 (for companies that are U.S. taxpayers),
      • W-8BEN-E (for companies that are not U.S. taxpayers) or
      • W-8IMY (for foreign intermediaries).
    • As a general matter, a U.S. broker will need to collect one of these forms from each payee to which you remit premium.
    • Q: What payments are subject to withholding under FATCA?
    • A: A category called “withholdable payments,” which includes U.S. source insurance premiums (i.e., those covering U.S. risks), as well as U.S. source interest, dividends, royalties, certain other types of payments, and, with respect to sales or other dispositions occurring after December 31, 2016, any gross proceeds from the sale or disposition of any property that can produce interest or dividends that are U.S. source income.
    • Q: What is a “withholding agent”?
    • A: Any person, U.S. or foreign, that has the control, receipt, custody, disposal, or payment of a withholdable payment.
    • Q: What is a “foreign financial institution,” or “FFI”?
    • A: Any foreign entity that is a financial institution. Under FATCA, the term financial institution includes a bank, a custodial institution, an investment entity, an insurance company that issues or makes payments with respect to cash value insurance or annuities, and certain other entities.
    • Q: What is a “nonfinancial foreign entity,” or “NFFE”?
    • A: A foreign entity that is not a financial institution.
    • Q: What is a global intermediary identification number, or “GIIN”?
    • A: A “GIIN” is obtained by certain FFIs and NFFEs that are required to register with the IRS to obtain a FATCA status that allows them to be exempt from withholding. For some FATCA statuses, the Form W-8BEN-E is not valid unless it contains a Global Intermediary Identification Number (“GIIN”) that is verified against a list that will be published by the IRS. These statuses are Participating FFI, Reporting Model 1 FFI (after January 1, 2015), Reporting Model 2 FFI, Registered Deemed-Compliant FFI, Sponsored FFI that Has Not Obtained a GIIN (GIIN of sponsoring entity must be provided), Certified Deemed-Compliant Sponsored Closely Held Investment Vehicle (GIIN of sponsoring entity must be provided), Owner-Documented FFI, Direct Reporting NFFE, and Sponsored Direct Reporting NFFE). The IRS publishes a list of FFIs that have been issued GIINs at http://www.irs.gov/Businesses/Corporations/FATCA-Foreign-Financial-Institution-List-Search-and-Download-Tool. This list is expected to be updated on a monthly basis.
    • Q: What types of placements are subject to FATCA?
    • A: Any placement generating premium related in whole or in part to a U.S.-based risk (i.e., risks in connection with U.S. property, U.S. activities, or the lives or health of U.S. residents) is subject to FATCA.
    • Q: I need to secure the compliance form for Lloyd’s.
    • A: Lloyd’s has agreed with IRS that a single W-8 IMY will be sufficient for FATCA purposes to cover insurance premiums paid to any and all syndicates at Lloyd’s. Brokers should obtain this form directly from Lloyd’s website HERE.