Multifonds has organized a series of workshops to assess the impact of the Foreign Account Tax Compliance Act (FATCA) and plan solutions for the upcoming regulation. The company said that asset managers, fund administrators and vendors can make progress on some points of the regulation now, despite a lack of clarity in some cases.
FATCA is the cornerstone of US tax legislation relating to foreign accounts held by US citizens. The intent of FATCA is to capture all potential tax revenue that is payable on the worldwide income of US persons. The regulations will come into effect in Jan. 1 2013 and will force financial institutions to adapt to more stringent information and reporting requirements, with more rigorous identification and documentation of investors, and withholding taxes for non-compliance.
With that in mind, Multifonds organized workshops with fund accounting and transfer agency clients to assess how prepared they were, and what still needed to be done for them to become fully FATCA compliant on schedule. The workshops, which included 28 individuals from 11 tier 1 asset managers and fund administrators, considered the implications of FATCA in terms of recording, withholding tax calculations and reporting.
The main conclusions were that, in the case of fund accounting, the new regulations will mean additional requirements to record static data, such as whether an instrument is categorized as US or not, as well as the calculation of the pass through payment percentage (PPP) of the fund. For transfer agency, the static data recording needs centre on the attributes of the fund and investors whether they are US or non-US as well as the withholding calculation based on the PPP.
However, some aspects of the FATCA regime remain unclear, particularly the required reporting.
Alexandre Delabre, head of Transfer Agency Product Management at Multifonds and a member of the ALFI FATCA working group, said: Although the regime will not come into force until January 2013, with the first phase of requirements coming into effect on July 1 2013, asset managers and fund administrators should look to take action now and start to classify their funds and investors based upon the expected FATCA regulation. Once the regulation is issued, asset managers and fund administrators will only have a short period of time to gather the required investor documentation in order to be ready to comply by the effective date.
The Multifonds user group is meeting again this week to review progress towards the resolution of the outstanding issues, and to agree the first phase of development required.
(JDC)