Banks to apply FATCA law

Taxes concern US citizens, Green Card holders

Local banks have started to apply measures related to the US tax law known as FATCA. Clients are requested to fill, sign, and return some tax forms by end-October at the latest.

FATCA aims at preventing tax abuse by US persons, and requires foreign financial institutions to identify and provide information on US clients with accounts outside the US.

“We are sending a notification letter to our clients to be aware about this tax law, and classifying those who are considered ‘US persons’ in our client base,” said Nathalie Dagher, Head of Legal and Compliance Department at FFA Private Bank.

‘US persons’ are defined by any of these seven criteria: US citizens, US passport holders, people born in the US (unless they renounced citizenship), Green Card holders, Non-US citizens present in the US for at least 183 days per year, companies with at least ten percent US shareholding, trusts with US beneficiaries.

The tax forms are standard forms by US authorities, while notification letters sent to bank clients are currently written by banks’ management. “Once clients are identified by the bank as US persons, a new ‘Know Your Customer’ information sheet about their full client profile will be sent to them,” said Dagher.

The Association of Banks (ABL) is expected to send banks this ‘Know Your Customer’ standard information sheet soon, in order for them to abide by it. “This sheet will include accounts data pertaining to the banking secrecy regulations, and other detailed information to be updated by the client,” she said.

Once a bank identifies its US person client base, it should report its findings to the US Internal Revenue Service (IRS). “We only do the reporting to this US department, concerned clients should pay their dues directly to the IRS, according to the US tax law,” Dagher said.

A bank will only have responsibility toward the IRS if it had clients who do not want to be compliant with FATCA. “The bank is not allowed to disclose these clients’ names to the IRS but only their total number. The bank will have to do a withholding of 30 percent of those recalcitrant clients’ revenues, as per the client account data, and pay it to the IRS,” said Dagher.

Banks files and documentation about clients compliant with FATCA should be ready by beginning 2014, while the implementation of that US tax law should take place by mid 2014, according to Dagher.

The Central Bank (BDL) did not imply any standard forms to banks regarding FATCA yet. “It is only guiding banks in this regard through training sessions or seminars,” said Dagher.

US persons residing in countries which had tax agreements with the US could benefit from favorable conditions. Lebanon has not signed any bilateral tax agreement with the US yet. So local clients may be subject to paying taxes to local and US financial authorities at the same time. Dagher said that banks cannot help clients in that regard. Clients who refuse to be compliant with FATCA will be considered recalcitrant. “If the bank is flexible with clients, it will risk closing its accounts in the US or shutting down any of its operations there,” she said.