Introduction
As an investor in a Roundtable Fund, you will need to provide us with a so-called FATCA form. This article provides more context about what is the FATCA Form.
This other article provides some guidance about how to fill it.
What is the FATCA Form?
The Foreign Account Tax Compliance Act (FATCA) is a United States federal law enacted to prevent tax evasion by U.S. persons holding accounts and other financial assets offshore.
FATCA requires foreign financial institutions (FFIs) - including investment funds in jurisdictions such as Luxembourg - to report information about financial accounts held by U.S. taxpayers, or by foreign entities in which U.S. taxpayers hold a substantial ownership interest.
Before reporting, the FFIs thus needs to obtain various information from its investors, who must file with it various FATCA forms, such as Form W-8BEN, W-8BEN-E, and Form W-9. This helps FFIs to identify the tax status of their investors.
Why and when is the FATCA Form required?
FATCA Forms are required from all investors to verify their tax status with respect to the United States, regardless of whether they are U.S. persons. These forms must be provided:
At the time of initiating an investment in a fund; and
Whenever there is a change in circumstances affecting the investor’s FATCA status.
The purpose is to ensure the fund remains compliant with FATCA regulations by identifying U.S. persons and reporting relevant financial information to the U.S. Internal Revenue Service (IRS), thereby avoiding penalties for the fund.
What is the penalty for not providing FATCA forms?
If the investors do not provide FATCA Form to the fund, this will place the fund in a situation where it is not able to report properly to the tax authorities.
This can lead to significant penalty for the fund and the investors.
For the fund: Non-compliance can result in a 30% withholding tax on certain U.S. source income, including interest, dividends, rents, and royalties. Moreover, severe non-compliance could lead to the fund being reported to the IRS, with potential legal consequences and reputational damage.
For the investors: Investors failing to provide the required forms may face withholding on distributions from the fund and could be denied the opportunity to invest in certain funds or financial products.