The Foreign Account Tax Compliance Act ("FATCA") was enacted as part of the Hiring Incentives to Restore Employment ("HIRE") Act in March 2010 to serve as an administrative tool to prevent and detect US tax evasion and improve taxpayer compliance.
U.S. congress estimates that tax evasion by U.S. persons equates to losses of up to $100 billion per annum. The fundamental objective of FATCA is therefore to identify those U.S. persons who may be evading tax through the use of offshore investment vehicles.
Following a series of Internal Revenue Service ("IRS") notices on a number of issues and comment letters from industry, the US Department of Treasury and the IRS released proposed FATCA regulations in February 2012. The Final FATCA regulations were released on 17 January 2013.
FATCA compels any entity making or receiving a payment of U.S. source income to consider whether it is subject to FATCA. FATCA may apply to both financial and non-financial operating companies. Due to this scope, FATCA impacts virtually all non-U.S. entities, directly or indirectly, receiving types of U.S. source income, including cash-value insurance contracts.
Entities such as NAGICO, therefore must provide information regarding ‘accounts’ held by US persons to the IRS and/or local tax authorities, or to provide information about their US owners (if any).
Only "cash value insurance contracts" and annuities are within FATCA.
Cash value is defined as the greater amount that the policyholder can receive upon surrender or termination and the amount the policyholder can borrow under or with regard to the contract. It excludes payments made regarding personal injury and sickness benefits. It also excludes payments for insured risks and refunds of premiums (other than life policies) due to cancellation, price adjustment, etc.
The term “Cash Value Insurance Contract” means an Insurance Contract (other than an indemnity reinsurance contract between two insurance companies) that has a Cash Value greater than $50,000 USD at any time during the calendar year.
Term life products are also out of scope. This is intended to carve out life protection.
NAGICO will request you fill out Form W-9 (Request for Taxpayer Identification Number and Certification) for our records if you fit any of the following criteria:
1. You have US citizenship or lawful permanent resident (green card) status.
2. You were born in the United States.
3. You have a US residence address or a US correspondence address (including a US PO box).
4. You have standing instructions to transfer funds to an account maintained in the United States, or directions regularly received from a US address.
5. You have an “in care of” address or a “hold mail” address in the United States.
6. You have granted power of attorney or signatory authority granted to a person with a US address.
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