Under the Foreign Account Tax Compliance Act (FATCA) intergovernmental agreement (IGA) between Hong Kong and the US, the deadline for the first FATCA reporting was 31 March 2015. Here we discuss the reporting requirements, other deadlines, and also what extensions are available for those Hong Kong financial institutions (HKFIs) that have not complied.
The 31 March 2015 deadline applies only to Model 2 foreign financial institutions (FFIs) such as HKFIs. The reporting deadline for Model 1 FFIs is 30 September 2015 for reporting by the local competent authority to the US Internal Revenue Service (IRS). Model 1 FFIs may be required to report information earlier to the local tax authority, generally sometime between April and June.
[ihc-hide-content ihc_mb_type=”show” ihc_mb_who=”1″ ihc_mb_template=”2″ ]
For this year only, the IRS has granted an automatic 90-day extension of time to file the required form (No. 8966) without the need to file any request for extension. However, according to the instructions of form No. 8966, no extension of time to file is permitted for these forms filed by a Model 2 FFI to report a non-consenting US account or a non-consenting non-participating FFI. Based on the automatic extension, any US account maintained during 2014 for which consent was obtained should be reported to the IRS by 29 June 2015 (this deadline includes the automatic extension). However, there is no extension available for reporting of non-consenting US accounts. Therefore, the aggregate information of all non-consenting US accounts should have been reported to the IRS by 31 March 2015.
What to report
With respect to non-consenting US accounts, HKFIs were required to report by 31 March 2015 the aggregate number of non-consenting US accounts they maintain and the aggregate balance of these accounts. The filing of form No. 8966 should be done electronically. HKFIs were not required to report account holder-specific information of any non-consenting US account in the 31 March reporting.
For calendar year 2014, HKFIs are required to report by 29 June 2015 the following information regarding their consenting US accounts:
- The name, address and US taxpayer identification number (TIN) of the account holder;
- For an account holder that is a passive non-financial foreign entity (NFFE), the name, address and TIN of any controlling persons who are US persons;
- The account number; and
- The account balance or value.
For the calendar years following 2014, HKFIs will also be required to report the aggregate gross payment amounts to consenting US account holders classified according to income type: interest; dividends; gross proceeds/redemptions; and other income.
Required actions
HKFIs must meet their Hong Kong IGA reporting deadlines. Failing to meet the reporting requirements under FATCA will impact a HKFI’s FATCA compliance position.
It is important to note that HKFIs were not required to complete all due diligence processes with respect to pre-existing accounts by 31 March 2015. Under the Hong Kong IGA, the deadline for reviewing pre-existing high-value individual accounts is 30 June 2015, and the deadline for reviewing pre-existing entity accounts and pre-existing lower-value individual accounts is 30 June 2016. Pre-existing “high-value accounts” are accounts with a balance or value exceeding US$1 million as of 30 June 2014.
In order to satisfy their 2014 calendar year reporting requirements, HKFIs need to report the information of the financial accounts that have been already identified as US accounts. This includes all new US accounts (opened on or after 1 July 2014 and before 1 January 2015) and all pre-existing accounts that the HKFI identified as US accounts (these accounts may have been identified as such based on relationship managers’ actual knowledge that the accounts are US accounts or identified as US accounts according to the due diligence process for which the deadline has not yet passed).
[/ihc-hide-content]
Business Law Digest is compiled with the assistance of Baker & McKenzie. Readers should not act on this information without seeking professional legal advice. You can contact Baker & McKenzie by e-mailing Danian Zhang (Shanghai) at: danian.zhang@bakermckenzie.com
