Treasury and Trade Solutions March 2016 Global Tax Initiatives The Evolving Regulatory Environment
Global Tax Initiatives The Regulatory Environment Local Governments Governments are continuing to coordinate efforts against tax evasion Banks Financial Institutions are being tasked with executing enhanced due diligence procedures across new and existing clients to meet Tax Authority requirements Clients Clients continue to be challenged by the evolving regulations and view the enhanced due diligence procedures as onerous and repetitive 1
Overlapping Tax Initiatives Impacting Global Clients The Foreign Account Tax and Compliance Act (FATCA) U.S. tax legislation that aims to prevent or detect tax evasion by U.S. Persons, generally effective July 1, 2014 May require U.S. and Foreign Financial Institutions to report directly or indirectly to the US IRS on accounts held outside the United States by i. Specified US Persons ii. Passive Non-financial Foreign Entities with Substantial US Owners iii. Financial institutions that do not comply (or "participate") with FATCA (so-called "non-participating FFIs [NPFFIs]) Withhold a 30% FATCA tax from certain types of U.S. source income when paid to actual or presumed NPFFIs United Kingdom Crown Dependencies and Overseas Territories (UKCDOT) UK tax legislation that aims to prevent or detect tax evasion by reportable persons, effective July 1, 2014 Reporting financial institutions are required to document the reporting status of account holders and individuals who control passive non-financial entities and their tax residency information Report accounts owned directly or indirectly by specified tax residents in the UK, Guernsey, Isle of Man, Jersey or Gibraltar The Common Reporting Standard (CRS) Tax initiative being driven by the Organisation for Economic Cooperation and Development (OECD); CRS essentially applies FATCA principles, effective January 1, 2016 or later depending on local law enactment CRS requires financial institutions located in participating jurisdictions to implement due diligence procedures to document the tax residence country or countries and TINs and report accounts to the local tax authorities for further exchange of information with the country of tax residence As of March 1 2016, more than 30 countries have formally adopted CRS and most of the OECD member countries are expected to formally adopt CRS in the coming years. 2
3 The Foreign Account Tax Compliance Act (FATCA)
FATCA 5 Key Focus Areas for Cash Accounts Applies to: Accounts opened on or after January 1, 2015 for legal entities FATCA Requirements: Collect documentation to establish FATCA status at account opening Identify U.S. indicia that make the claimed status incorrect or unreliable Validate tax documentation collected against all account information New Account Due Diligence Withholding Applies to: U.S. source FDAP interest on deposits paid on / after Jan 2015 in U.S. and Jan 2017 outside the U.S., unless an exception applies (e.g. grandfathered obligations, short-term debt). Generally does not apply during due diligence period for pre-existing accounts FATCA Requirements: USFIs must withhold on NPFFIs Applies to: Accounts opened prior to January 1, 2015 for legal entities FATCA Requirements: Search for indicators of U.S. status on existing accounts Both US Financial Institutions and Non-US FIs must request documentation to establish the FATCA status of all entities Preexisting Account Due Diligence Monitoring for Changes in Circumstance Regulatory Information Applies to: All accounts FATCA Requirements: Monitor for changes in circumstances that affect the FATCA Status of the account holder Collect additional documentation, as required Depends on: The country where the account is maintained and whether the Citi entity is a U.S. or a foreign bank FATCA Requirements Reporting may be filed directly with the IRS or indirectly through a foreign government 4
FATCA Impact to TTS Cash and Timeline The Timeline for Compliance Dec 31, 2014 Jan 1, 2015 March 31, 2016 June 30, 2016 July 1, 2016 Dec 31, 2016 Jan 1, 2017 March 31, 2017 May Sept 2017 Classify all FIs with accounts in the US Implement new Account opening rules File 2015 FATCA reporting with IRS on Form 8966 Complete FATCA classification for global account holders Initiate withholding on accounts held in the US for actual and presumed NPFFIs Global snapshot taken of FATCA classification of account holders for year-end reporting Initiate withholding on interest in CBNA branches outside US (Where legally allowable) File 2016 FATCA reporting with IRS on Form 8966 Local IGA Model 1 Reporting What Should Clients be Doing Now? Identify your legal entities that do business with all Banks, not just Citi Contact your Banks to understand the specifics Engage your Tax Department Prepare Tax Forms now if not readily available TTS has developed a number of tools ot help clients execute this effort: https://www.citi.com/tts/sa/taxinitiatives/fatca.html 5
FATCA Available Tools 6
FATCA Available Tools 7
FATCA Available Tools 8
FATCA Available Tools 9
FATCA Available Tools 10
FATCA Available Tools 11
12 The Common Reporting Standard (CRS) and United Kingdom Crown Dependencies and Overseas Territories (UK CDOT) Tax Initiatives
Common Reporting Standards TTS Country Scope Belgium Denmark Finland France Germany Greece WE Ireland Italy Jersey Luxembourg Netherlands Norway Portugal Austria Romania Slovakia Spain Sweden United Kingdom CEE Bulgaria Czech Republic Hungary Poland Russia Turkey NAM Canada APAC India Korea Australia China Hong-Kong Indonesia Japan Macau Malaysia Singapore New Zealand LatAm Middle East Argentina Colombia Mexico Trinidad and Tobago Bahamas Brazil Chile Costa Rica Uruguay Israel Qatar UAE Bahrain Africa South Africa (effective March 1) Country Legend Bold Green = Formally adopted CRS as of Jan 1 2016 Orange = Watch list to adopt in 2016 Blue = Expect to adopt in 2017 Purple = Expect to adopt in 2018/2019 The OECD is the source of this information and the OECD continues to provide updated information. We will make every effort to keep this document up to date. If you have any concerns about a country live date, please refer to the OECD website. 13
CRS & UKCDOT Key Focus Areas for Cash Accounts Applies to: For UKCDOT, applies to accounts opened on or after July 1, 2014 For CRS, applies to accounts opened on or after January 1, 2016 in early adopter jurisdictions or later depending on local law enactment Accounts opening on or after January 1, 2017 in remaining OECD jurisdictions, provided those markets formally adopt CRS UKCDOT & CRS Requirements: Collect documentation to establish with tax residence and reporting status at account opening Validate documentation collected against all account information New Account Due Diligence Withholding Not Applicable Applies to: For UKCDOT, applies to accounts opened prior to July 1, 2014 For CRS, applies to accounts opened prior to January 1, 2016 in most early adopter jurisdictions * Accounts opened prior to January 1, 2017 in remaining OECD jurisdictions, provided those markets formally adopt CRS UKCDOT & CRS Requirements: Collect documentation to establish tax residence and reporting status Validate documentation collected against all account information Preexisting Account Due Diligence Information Reporting Applies to: All participating jurisdictions UKCDOT & CRS Requirements UKCDOT First report due May 2016 CRS Reporting specifications and due dates are determined locally by each participating country; first reports due in 2nd or 3rd quarter 2016 14 * India CRS has a solicitation deadline of June, so clients with accounts in India have already received this solicitation
CRS Impact to TTS Cash Accounts Clients opening accounts in participating markets should provide a CRS Self-certification form The CRS Self-certifications have been developed by Citi and other Financial Institutions Countries may develop their own self-certification forms, but in lieu of a country mandated form, clients are requested to use the standardized Citi form The Citi form is available in local languages TTS Cash Accounts The OECD requirements specifically do not allow for extentions of time to furnish a CRS Self-certifications; clients who do not return CRS Self-certifications will be prevented from opening an account While there is no deferral, accounts can be opened upon receipt of the form, and we can work with clients for up to 90 days to validate the form before restrictions are put on the account and/or we re required to close the account The inability to offer deferrals under CRS has been interpreted consistently with our competitors Generally, Self-certification forms from clients can be applied to multiple accounts at a any Citi office within the same participating country, but cannot be applied in different countries A separate effort will be required to document clients with accounts opened prior to January 1, 2016 in participating countries Generally the due date for completed PADD is December 2017. However, certain markets, such as India (June 2016) have earlier deadlines 15
CRS Impact to TTS Cash Accounts and Interest-Bearing Products Under CRS, any Time Deposit, Minimum Maturity Time Deposit (MMTD) or similar interest-bearing instruments are considered a Financial Account and are subject to requirements similar to standard deposit accounts. Starting January 1, 2016, Clients wanting to place any of these types of deposits in participating countries will be subject to CRS due diligence procedures for new accounts. Impact to New Implementations in Participating Jurisdictions In participating countries, clients will need to complete a CRS Self-certification prior to being on-boarded to the product if one is not already on file from the depository account maintained in the same country. We cannot offer these products to clients without a CRS Self-certification form on file Impact to Existing Clients in Participating Jurisdictions Time Deposits and Similar Interest-bearing Products Existing clients may be required to complete the necessary documentation after which clients may not be able to use these products without a CRS self-certification on file. Impacted clients have previously received a request to provide a CRS Self-certification 16
Global Tax Initiatives The Regulatory Environment Local Governments TTS continues to Remain committed to comply with evolving regulations Banks Clients Challenge requirements to streamline internal processes and client requirements Remain focused on our goal to reduce required client documentation the overall the clients experience 17
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