Wolters Kluwer Financial Services today has launched FATCA GFD (Grandfathered Debt), which allows withholding agents to monitor whether debt instruments have lost their FATCA withholding exemption status due to a material modification.
The FATCA GFD service utilizes the corporate actions knowledge of Wolters Kluwer Financial Services’ Capital Changes team and the firm’s GainsKeeper technology (a tax lot accounting solution) to identify the impact of modifications and corporate actions affecting the grandfathered status of the user’s debt securities. FATCA GFD users can benefit from a reduction in manual processes while minimizing their withholding tax risk, as issuers are not required to provide notice of material modifications under FATCA, yet all withholding agents are required to adjust withholdings when they have actual notice, or reason to know, that a material modification has occurred.
“Many financial institutions are faced with limited or overstretched tax law expertise to interpret notices, even if they do indicate whether a material modification of a debt instrument has occurred,” says Chuck Ross, vice president and general manager of Investment Compliance Solutions at Wolters Kluwer Financial Services. “Financial institutions without a system already in place will have to allow ample time for implementation and testing prior to the July 1 effective date, or expose themselves to additional tax risk.”
“A concern many in the industry have is the perspective that upon initial read, the regulation itself gives a false sense of security that the responsibility to provide notice of a material modification lies with the issuer,” says Stevie Conlon, senior director and tax counsel, Wolters Kluwer Financial Services. “But a more in-depth read reveals that in fact every withholding agent has to be able to answer the question to stay in compliance. FATCA GFD will reduce the tax risk associated with these potential gaps.”
Wolters Kluwer Launches FATCA Tool for Grandfathered Debt
Wolters Kluwer Financial Services today has launched FATCA GFD (Grandfathered Debt), which allows withholding agents to monitor whether debt instruments have lost their FATCA withholding exemption status due to a material modification.