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Foreign account tax compliance act: Implications, considerations and responses

The Foreign Account Tax Compliance Act (FATCA) is an important milestone in the United States (US) government’s efforts to improve tax compliance.

Overview

Under FATCA rules, foreign financial institutions (FIs not operating in the US or FFIs) are required to report to the Internal Revenue Service (IRS) about any American client data with which they have direct or indirect contact.

In July 2012, the IRS issued the first model for an Intergovernmental Agreement (Model IGA) for complying with FATCA provisions. It followed up with the final FATCA regulations on January 17, 2013. The first regulatory compliance deadline for FFIs is January 2014.

FATCA covers various types of financial products (representing US and and non US-sourced income) as well as individual and entity accounts with specific requirements. The definition of a US client includes several classifications such as persons with US citizenship, US residents, and persons with a permanent permit to stay in the US.

Complying with FATCA may require significant efforts in terms of implementation, and investments and resources in 2013 and 2014 in operational processes, information systems, training and communication, and customer relationship management, as well as the compliance and tax functions.

Why Accenture

FATCA will significantly impact two areas—organizational and business processes and information systems. For successful FATCA programs, some key factors to consider include:
  • Adopting a group-level program, with centralized governance—FATCA Corporate Center Approach—and local implementation.

  • Basing the governance model on a centralized business requirements definition and on decentralized implementation.

  • Defining a risk-based action plan—implementing the Customers Identification and Classification processes and developing a process for withholding tax management and reporting.

  • Adopting centralized solutions that can be replicated locally for economies of scale.

  • Undertaking proactive communication with employees and structuring a strong change management plan.

Accenture has developed a complete project model to help handle all functions and groups of a client organization involved in a regulatory change program, including the people, processes and technology. Accenture collaborates with FIs in conducting feasibility studies to help identify detailed functional and technical requirements to elaborate a FATCA program master plan.

Accenture has developed a comprehensive review of the FATCA regulatory requirements that covers 22 process changes related to due diligence, taxation and reporting. It has also developed the Accenture Target IT Architecture Framework Design that includes a new FATCA Engine to help clients implement the following:

  • Support the customer onboarding process and interact with the legacy systems to collect all the data or information needed.

  • Determine the final FATCA status and accurately route the FATCA workflows.

  • Send the FATCA status to the concerned legacy systems.

  • Report the required information to the tax authority.

  • Digitally archive documents to support due diligence or customers onboarding execution.

  • Manage new alerts workflows (for periodic review of the FATCA status).

Specific Services
Accenture Target IT Architecture Framework Design with FATCA Engine.