Question About FATCA - 2014

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Patrice Fritsch
Luxembourg FATCA Leader
+352 42 124 8950
patrice. fritsch@lu. ey. com
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This material has been prepared for general informational purposes
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professional advice. Please refer to your advisors for specific advice.
ey. com/luxembourg
Christian Daws
FATCA Tax Leader
+352 42 124 7196
christian. daws@lu. ey. com
Olivier Coekelbergs
Private Equity Leader
+352 42 124 8424
olivier. coecklebergs@lu. ey. com
Michael Hornsby
Real Estate Leader
+352 42 124 8310
michael. hornsby@lu. ey. com
Do you really know how your

Private Equity or Real Estate
entities are impacted by FATCA?
Background
Questions
HIRE Act (Hiring Incentives to Restore

Employment), that includes FATCA requirements
(Foreign Account Tax Compliance Act) has been
adopted in the United States on 18 March 2010.
FATCA introduces a complex framework in terms

of client identification, entity classification,
reporting to the IRS, and US tax withholding, in
order to combat tax evasion by US persons.
2. Is FATCA applicable to Private Equity

structures which do not have US beneficial
owners and do not invest in the US?
All investment entities and other foreign
financial institutions (FFIs) are in the scope
of FATCA and the IGAs between the US and
the IGA countries regardless of the origin
of beneficial owners and destination of
investments performed.
The investor categorization will support the
entity pre-classification under FATCA but will
not exclude investment entities and FFIs from
its scope.
IRS
U. S. Person
U. S. and
non-U. S. Investment
Reporting
Approach sample
Fund PE
Invest
Entities
classification
6
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s
ure
ed
roc ing
w p ain
Ne nd Tr
a
Private Equity and Real Estate

funds and their investment
vehicles and intermediate entities
need to comply with national law.
As a consequence, most of the
investment entities will need to
become compliant with FATCA
requirements included in IGA.
Investment entities such as
ors
est nce
Inv ilige
ed
du
Agreements) Model 1 countries,

similar FATCA requirements will
be transposed into national law.
FA
T
Ho CA
su tline
pp
ort
In IGA (Intergovernmental
Luxembourg
Do
c
im ume
pa
ct ntat
i
an
aly on
sis
Repo
rt
via lo to IRS
c
auth al tax
orite
s
1. How are Private Equity structures in

Luxembourg impacted by FATCA?
The Luxembourg authorities are currently
finalizing an Inter Governmental Agreement
(IGA) with the IRS. As a result, Luxembourg
will implement most of FATCA into Luxembourg
Law and Luxembourg Financial Institutions
under the IGA will need to comply with the
requirements of this local law.
IRS
Registration
3. What actions are needed to be in compliance

with FATCA?
All entities shall implement dedicated Investor
due diligence and update their documentation
accordingly, enabling identification of US
indicia and of non participating FFIs.
Management of the Luxembourg entities shall
approve a pre-classification of the entity under
FATCA and decide whether it will register
(reporting FI and potentially certain nonreporting FIs) or self- certify (non-reporting FI).
Each registered FFI will obtain a GIIN number
which each will use to certify its status to other
FFIs and US withholding agents and will report
and certify annually to the IGA country tax
authority.
4. Can the compliance process be centralized for
a structure including multiple entities?
FATCA allows delegation of tasks from one
entity to another. However delegation of tasks
does not mean delegation of responsibilities.
The FFI remains responsible for the fulfilment
of its FATCA obligations whether it has
delegated tasks or not.
5. What are the risks in being non-compliant
with FATCA?
Entities that do not comply with FATCA
requirements will face a 30% potentially
nonrefundable withholding tax on US sourced
income paid payments made on or after 1 July

2014, regardless of whether they have US
beneficial owners or not.
Luxembourg and many other countries opted
to sign an IGA.
Therefore, choosing not to be compliant
will not be an option for FFIs located in
Luxembourg and any other jurisdiction with
an IGA. Non compliance with national law (and
indirectly with FATCA) may lead to fines and
other sanctions and may in the medium term
potentially jeopardize the entitys operating
licence. If an entity is within an Expanded
Affiliated Group, noncompliance with IGA/
FATCA requirements may impact all other
entities.
6. When is FATCA applicable?
FATCA will be applicable as of 1 July 2014.
Luxembourg entities that are Reporting
Luxembourg FIs must register with the IRS
and obtain an GIIN by 1 January 2015. To
have a GIIN and to be included in the IRS list of
registered FFIs by 30 June 2014, they must
register before 25 April 2014
Benefits to you
You have access to a specialized and dedicated
local FATCA team.
We are a global multidisciplinary team
composed of Audit, Tax, Advisory and IT
consultants
Involved in implementation of numerous FATCA
projects for banks and for asset managers
Actively participating in local and global FATCA
Working Groups within the financial industry
and connecting with tax administrations
Our offer
EY Luxembourg put in place a team of
professionals fully dedicated to FATCA matters.
They offer a wide range of tailor made services,
including:
Assistance in the various stages of investor
due diligence, entity classification, update of
documentation
Assistance in registration with the authorities
(Luxembourg, IRS)
Regulatory warning
Hotline services

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EY | Assurance | Tax | Transactions | Advisory

EY refers to the global organization, and may refer to

Do you really know how your

HIRE Act (Hiring Incentives to Restore

FATCA introduces a complex framework in terms

2. Is FATCA applicable to Private Equity

Private Equity and Real Estate

Investment entities such as

Agreements) Model 1 countries,

1. How are Private Equity structures in

3. What actions are needed to be in compliance

income paid payments made on or after 1 July

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