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Abstract: 

There has been a great deal written concerning FATCA, which attempts to identify U.S. taxpayers who hold financial assets, and the impact that the law places on the financial institutions holding such accounts as well as the many other business entities that may be caught in the wide FATCA web. Although industry has been very active in pointing out the many discrepancies in the rules, the ambiguous terms, and the entity types that do not pose a risk of fostering tax evasion, many leasing, financing, and factoring institutions have not been particularly vocal, even though many of them may find themselves among those classified as foreign financial institutions (FFIs). This status quo is especially risky where such entities are part of large global firms with many FFIs in their overall group because a participating FFI’s agreement can be revoked if any FFI within its affiliated group is not FATCA compliant. Therefore, a misclassification of one or more entities within the group could jeopardize the participating FFI status of all members of the group—potentially subjecting them to withholding on U.S.-sourced income and gross proceeds. The authors explain the risks of misclassification and consequences of non-compliance, and spotlight the areas global factoring, financing, and leasing institutions should examine.

Keywords: Foreign Account Tax Compliance Act; FATCA; leasing; factoring; financing; tax withholding; foreign financial institutions; FFI; non-financial foreign entities; NFFE

Affiliations:  1: Deloitte Tax LLP; 2: Deloitte Tax LLP.