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FATCA and funds

FATCA and pre-existing

Executive summary

FATCA is a new U.S. law to combat tax avoidance by U.S. taxpayers earning income outside the U.S. by requiring non-U.S. financial institutions, including banks and investment funds, to undergo specific client identification and reporting procedures or suffer a 30 percent withholding tax on most U.S. source payments, including gross proceeds from the sale of U.S. securities. While previous compliance with similar regimes have put many banks in a relatively good position to adapt to the changes required under FATCA, for the investment and wealth management businesses this compliance will be completely new. The legislative language of FATCA adopts banking terminology and concepts that are appropriate for banks, but does not necessarily lend itself to funds. Furthermore, investment funds may have to deal with more complex investor identification, income identification, and questions regarding who undertakes the operational FATCA work. Deloitte is actively assisting financial institutions to understand, plan and execute on their FATCA compliance programs.

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