W-8BEN-E box 29e is the Crucial Authority to Deal in Capital
What Foreign Account Tax Compliance Act (FATCA) is all about in general, we know all of that, and there are some exemptions and things, but as a practical point, many individuals may want to listen to the sound of practicalities rather than the legal tra-la-la.
What it all comes down to in practical terms is where anyone, whether a U.S. person or a non-U.S. person, is investing in anything, whatsoever, that is denominated in U.S. Dollars whether it is real estate, an investment fund, a share, private equity, bank account and so on, anywhere in the world, is subject to FATCA.
Recently the U.S. government fined BNP Paribas over $8 billion for doing business with countries it doesn’t like. The transactions were totally legal under E.U. and French law, but illegal under U.S. law. The U.S. successfully claimed jurisdiction because the transactions were denominated in U.S. dollars—there was no other U.S. connection.
Because U.S. stocks and bonds are so widely owned globally, virtually all financial institutions everywhere in the world receive substantial U.S. sourced payments, mostly on behalf of clients who have no connection to the U.S.
U.S. Sourced payments include: U.S. securities, foreign securities held by U.S. persons directly, or indirectly via a company or trust, total return swaps or securities lending referenced to U.S. securities, previously exempt from withholding tax now qualify as U.S. source payments, derivatives products (dividend equivalent payments from derivatives which are referenced to U.S. securities are now treated as dividends from a U.S. source, therefore triggering a 30% withholding tax).
Furthermore, 30% of any funds sent from the U.S. to a non-compliant financial institution will be withheld by the U.S. financial institution. U.S. Sourced is a key issue here because that is a de facto set of capital control. Allowing 30% of these payments to be withheld will not be an acceptable option.
Any financial institution anywhere in the world not voluntarily complying with FATCA will find that 30% of any U.S. sourced payment (e.g. stock dividend, maturing principal payment from a U.S. corporate or government bond) will be withheld. Therefore, that means unless or until that person either has a FATCA registration, or unless they are able to swing themselves under it, they can’t deal.
“Deal on,” “deal off,” it is that simple; so therefore, every single time and any time anyone deals in any U.S. Dollar instrument they must be able to supply a W-8 BEN E and this new form of W-8 is quite extensive. Bring your attention to the retirement plan area on that particular form W-8BEN-E Part 1, Box 5, PARTXV Exempt Retirement Plans (b),(c) and (29 E) what that means is this, we can go ahead and we can set up a Foreign Retirement Plan all day long if we want to, we know that but what is going to come out of this?
It is all very well to bolt together an IRS recognized tax compliant foreign plan on the U.S. individual tax level, that is just a reporting issue, that’s a given. It is the dealing with the investments within that plan in particular that is subject to FATCA and unless the investment platform is able to sign a W8-BEN-E on behalf of this person they can’t deal in any U.S. Dollar connected investment nor make any investment without that investment having some sort of FATCA registration.
What having FATCA foreign retirement plan registration means is that when your investment platform/ account/ Foreign Financial Institution has the authorization to sign a W-8BEN-E then you have freedom to deal because any transfers in U.S. Dollar for or by that retirement plan are exempted from FATCA withholding and FATCA reporting.
Whether you are a U.S. person or not it still does not change the rules, which is that FATCA says that unless or until you are able to declare that you are exempted from FATCA, that is where the W8-BEN-E comes in, you can’t deal in U.S. Dollar denominated securities, instruments, real estate, funds, stocks, bank accounts and etc; whatever it is anywhere they must be in a position to file a W-8BEN-E so therefore the ability to sign a W8-BEN-E is everything and that is exactly what a recognized
What is the difference between capital and trade?
Hypothetically, direct and indirect capital investing disclosure is a direct interference to dealing and if you write that on a very large piece of paper it suddenly becomes apparent that even straight forward trade deals which might involve the deployment of capital are going to be interfered with because the way this thing is heading is that unless you have some sort of FATCA registration you can’t deal in USD’s or with a U.S. person.
It’s that simple. How do you define the difference between capital and trade? Say it is capitalized in USD, even $1 Dollar, it is capital and so therefore subject to FATCA. That is the extent of it effectively; how do you define the difference between capital and trade? FATCA does not define the difference.
Registered and recognized Foreign occupational retirement plans have legal privacy and secrecy brought to you by FATCA on Form 8957 and can be organized to be legally compliant to the domestic tax law of the U.S., countries of the O.E.C.D. and other countries. This 402(b) is recognized in common, civil and sharia law.
In the financial account exchange of information world, the U.S. and anywhere in the O.E.C.D. and AEOI world this is government regulated and recognized as non-disclosure. Contributions inside this specific type of entity are not reported as income until withdrawal and anything accrued inside is not taxable under O.E.C.D. or AEOI standards and not taxable back home in the USA