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Foreign Account Tax Compliance Act 2010 (FATCA) and Common Reporting Standard (CRS)

General

Foreign Account Tax Compliance Act 2010 (FATCA) is intended to capture United States (U.S.) person’s account information and report to the U.S. Internal Revenue Service (IRS) that may be investing and earning income through non-U.S. institutions.

Similar to FATCA, Common Reporting Standard (CRS) is a global standard introduced by the Organisation for Economic Co-operation and Development (OECD) for the automatic exchange of financial information between jurisdictions that have agreed to participate.

Hence, Financial Institutions (FI) are required to perform due diligence on account holders and identify non-residents and report to Inland Revenue Berhad Malaysia (IRBM) or U.S. IRS those information relating to the Reportable Jurisdictions.

Under the FATCA / CRS rules, we are required to collect information on the country of tax residence of our customers. We would like to seek your utmost cooperation by providing us your information and/or documentation for FATCA & CRS purposes should it be required. It is important that you respond to all requests in a timely manner.

If you are impacted by FATCA & CRS in any way, kindly contact your professional tax adviser as Malacca Securities Sdn Bhd (MSSB) is unable to offer professional tax advice.

Foreign Account Tax Compliance Act 2010 (FATCA) and Common Reporting Standard (CRS) - Self-Certification Form

Per regulatory requirement, all customers, including local tax residents in Malaysia, are required to complete the relevant Self-Certification forms based as follows:

The submission of the duly completed form(s) can either be personally sent to one of our branches or via email to [email protected]

Differences between FATCA & CRS

FATCACRS
Affected PersonComplete declaration of income from US TaxpayersComplete declaration of an account holder’s country (or countries) of tax residence.
AimsU.S Persons
The term ‘US person’ includes the following (but is not limited to):
  1. a citizen of the US, including an individual born in the US but resident in another country or territory (who has not given up their US citizenship)
  2. a person residing in the US, including US green card holders
  3. certain persons who spend a significant number of days in the US each year
  4. US corporations, US partnerships, US estates and US trusts.
Tax Residence of listed countries (E.g. Malaysia, Singapore, Japan & etc) List of Countries
Taxpayer Identification NumberSocial Security Number (SSN) for US Person individuals Employer Identification Number (EIN) for US Entities Individual Taxpayer Identification Number (ITIN) for Resident Alien and do not have/not eligible to get an SSNTaxpayer Identification Number (TIN)

General

What are the main steps involved in the process of submission of self-declarations to MSSB?

Clients need to do the following for submission of self-declarations to MSSB.

Steps

Submission

1. Download the self-declaration templates to be used
2. Fill in data
  • Clients need to fill in this in clear legible handwriting or type the data in respective fields on the self-declarations.
3. Tick the check boxes
  • Clients need to identify all the check boxes applicable to them
  • Client needs to tick them on the self-declarations.
4. Submit self-declarations to MSSB
  • Clients need to scan or save the self-declarations clearly in PDF Format and send a soft copy to MSSB via email to [email protected]
5. Provide supporting evidence
  • Clients need to scan their supporting documents clearly and send them along with the self-declarations to MSSB via email to [email protected]
6. Signatory
  • Clients need to sign at the section for “Declaration and Undertaking” of Self-Certification Form
What are the supporting evidences/documents needed in addition to the FATCA and CRS self-declarations?
  • For Individuals
    • Identity Proof that displays the full name (e.g NRIC)
    • Passport or any other document issued by govt. that displays the nationality, date of birth and country of birth
    • Address proof like bank statement, utility bills; separate for permanent and mailing address
    • Copy of tax statement or any other government issued document that displays their tax identification number.
  • For Entities
    • Certificate of Incorporation / business registration that displays the full legal name, country, and registered address
    • Address proof can also be like registration documents, or annual statements, Memorandum and Articles of incorporation, or Investment Management Agreement, that displays address
    • Entity type can be supported with Memorandum and Articles of incorporation, or Investment Management Agreement, or any other business practice license
    • Copy of tax statement or any other govt. issued document that displays their tax identification number.
How can you submit your FATCA and CRS self-declarations to MSSB?
  • The FATCA and CRS self-declarations can be sent to us via a soft copy can be emailed to MSSB at: [email protected]
Does this self-declaration need to be resubmitted periodically?

No, however, if there is any change in details of the client mentioned in the self-declarations changes the client is required to provide an updated self-declarations to MSSB  within 30 days of such change.

Why do I have to provide this FATCA – CRS information to MSSB?
  • For FATCA : The US government has signed the intergovernmental agreements with the countries that MSSB operates in, to make it mandatory for financial institutions like MSSB present in those countries to obtain such self-declarations from clients
  • For CRS : The local authorities in each country where MSSB operates in, has made it mandatory for financial institutions like MSSB present in those countries to obtain such self-declarations from clients

Hence, MSSB  would not be able to open new accounts if such self-declarations are not provided by clients at time of new account setup.

What would MSSB do if I do not provide this FATCA – CRS information?
  • MSSB may not open new accounts or offer additional products / services to clients who choose not to comply with MSSB request for documentation to establish a client’s status under FATCA or CRS.
  • MSSB may exit the relationship with clients who decide not to provide the necessary information and documentation to MSSB within the required regulatory timeframe.
  • Where clients refuse to provide their self-declarations, MSSB is obliged to report them based on the information available in our records to the relevant tax authority.
  • MSSB may also be required to withhold tax on certain US source payments coming into the client’s account.
Who should I contact if I have some queries?
  • MSSB is not authorized to provide clients with any tax advisory.
  • All the FATCA and CRS related queries can be directed to [email protected]

FATCA

What is FATCA?

FATCA stands for Foreign Account Tax Compliance Act 2010. It is a legislation to help counter tax evasion in the United States of America.

FATCA creates a new information reporting and withholding regime for payments made to certain foreign financial institutions and other foreign entities. Frequently asked questions about FATCA are available on 

U.S IRS website

How do I know if I am affected?

FATCA legislation affects both personal and business customers who are treated as a US person for US tax purposes. The FATCA legislation also affects certain types of businesses with US owners.

The term ‘US person’ includes the following (but is not limited to):

  • a citizen of the US, including an individual born in the US but resident in another country or territory (who has not given up their US citizenship)
  • a person residing in the US, including US green card holders
  • certain persons who spend a significant number of days in the US each year
  • US corporations, US partnerships, US estates and US trusts.

We will be reviewing the impact of the legislation for our customers, and will provide further information to affected customers in due course.

For more information regarding FATCA, please visit the 

U.S IRS website

 or contact your tax professional.

How many types of W8/W9 templates exist and how to select the appropriate W8/W9 template?

There is only 1 type of W9 template but there are 5 types of W8 templates. Below guideline can be used to select the appropriate template for submission to MSSB.

Template

Instructions

Guideline to select relevant template

W-9Instructions for the Requester of W-9Any Beneficiary Owner (Individual or Entity) who claims they are Tax Resident in United States
W-8BENInstructions for W-8BENAny Beneficiary Owner (Individual only) who claims they are Tax Resident outside United States
W-8BEN-EInstructions for W-8BEN-E

Any Beneficiary Owner (Entity only) who claims they are Tax Resident outside United States.

The form also contains options for the entities to declare themselves as exempted from FATCA

W-8IMYInstructions for W-8IMYAny person acting as an Intermediary rather than a Beneficiary Owner
W-8EXPInstructions for W-8EXPA foreign government, international organization, foreign central bank of issue, foreign tax-exempt organization, foreign private foundation, or government of a U.S. possession simply claiming the exemption from FATCA
W-8ECIInstructions for W-8ECIA foreign government, international organization, foreign central bank of issue, foreign tax-exempt organization, foreign private foundation, or government of a U.S. possession if they received income which is effectively connected with conduct of a Trade or Business in United States, and are not eligible to claim an exemption for chapter 3 or 4 purposes on Form W8EXP

CRS

What is CRS?

CRS stands for Common Reporting Standard, which is released by the OECD aims to put in place a global model of Automatic Exchange of financial account Information (AEOI) on tax matters to combat tax evasion and protect the integrity of taxation systems.

 Over 100 jurisdictions have publicly expressed their commitments to the implementation of CRS (“Participating Jurisdictions”). Under the CRS, the FIs of a Participating Jurisdiction are required to carry out due diligence procedures to identify the jurisdiction of residence of an account holder and identify whether a financial account is a “Reportable Account”. In respect of a Reportable Account, the FIs will need to report relevant information to the local tax authorities, who then exchange the relevant information with the tax authorities of the Reportable Jurisdictions where account holders are tax residents.

The full list of countries that have committed to the implementation of CRS is available here.

Frequently asked questions about CRS are available on OECD website

What are the various types of CRS self-declarations?

There are three types of CRS self-declarations

  • Individual – To be filled by natural persons who hold accounts at MSSB
  • Entity – to be filled by a legal entity who hold accounts at MSSB
  • Controlling Persons – to be filled by natural persons who exercise control of the legal entity
What is a TIN?
  • Taxpayer Identification Number (TIN) is a unique combination of letters and/or numbers assigned to you/your entity.
  • Some countries do not issue a TIN, and some countries may issue alternatives such as social security/national insurance numbers or company registration numbers.

The OECD has published a list of the acceptable 

Taxpayer Identification Number (TIN) formats

Where is my tax residency?
  • Your tax residency is the country where you are resident / registered for tax purposes.
  • Each country has its own rules or criteria for defining tax residency.
  • For more information on tax residency, please consult your tax advisor
If my entity is a passive NFE but do not have any natural person holding more than 10% by vote or value, who will be the controlling person?
  • In cases where there are no such natural person with more than 10% ownership, the senior managing official who makes decision for the entity will be the controlling person.
  • The entity will need to decide who their senior managing official is.