Financial Crime World

US Financial Institutions Required to Obtain Self-Certification from Non-US Account Holders

Background

In a move aimed at combating tax evasion, financial institutions in the United States are required to obtain self-certification from non-US account holders under Section II(B)(4)(a) of Annex I of the Intergovernmental Agreement (IGA).

Requirements for Financial Institutions

According to the IGA and Foreign Financial Institution (FFI) agreements, US financial institutions must request documentary evidence, including a self-certification, from non-US account holders to establish their non-US status. This requirement is designed to ensure compliance with US tax laws and regulations.

  • The self-certification can be obtained through the use of a form such as Form W-8BEN, published by the US Internal Revenue Service (IRS).
  • The form requires non-US individuals to provide information about their citizenship, residency, and tax status.
  • Financial institutions are also required to retain this documentation for a minimum of three years.

FATCA Registration

Financial institutions in Hong Kong are expected to leverage their anti-money laundering and know-your-client procedures to fulfill their responsibilities under the Foreign Account Tax Compliance Act (FATCA) and relieve their clients’ burden. Over 2,800 financial institutions in Hong Kong have already registered with the US IRS under FATCA.

Verification of FATCA Compliance

Depositors and investors can verify their financial institution’s compliance with FATCA by checking the IRS website.

International Agreements

The US has signed IGAs with over 75 jurisdictions worldwide, including Hong Kong. The IGAs aim to improve tax transparency and combat cross-border tax evasion.

AEOI Support

Hong Kong has announced its support for the new global standard on automatic exchange of information (AEOI) aimed at enhancing tax transparency and combating cross-border tax evasion. While there are no plans to switch to a Model I IGA before the legal framework for AEOI is available, the government will need to discuss technical details with the US and consult with financial institutions before implementing any changes.

Further Information

For more information on FATCA and IGAs, please visit the IRS website or contact your financial institution.