US Foreign Account Tax Compliance Act

Under the US Foreign Account Tax Compliance Act (FATCA), a foreign financial institution (FFI) is required to report to the US Internal Revenue Service (IRS) certain information on the US persons that hold accounts with that FFI outside the US, and to obtain their consent to the FFI passing that information to the IRS.

An FFI which does not comply with the requirements with the IRS in respect of FATCA and/or who is not otherwise exempt from doing so will face a 30% withholding payment on certain US sourced income (including interest and dividends) made on or after 1 July 2014, and gross proceeds from the sale or other disposal of property that can produce US sourced income starting from 1 January 2017.

Under existing regulations, certain other payments referred to as “foreign passthru payments” (term is not yet defined) may also become subject to withholding under FATCA no earlier than 1 January, 2017. It is expected that the IRS will issue further regulations in this respect.

Impact on investment funds and their investors

If an investment fund becomes subject to a withholding payment as a result of FATCA, the net asset value of the fund may be adversely affected and the fund and its investors may suffer material loss.

Investors should refer to the offering documents of the fund to obtain further information on the FATCA status of the fund and the associated risks relating to FATCA. If in any doubt about FATCA, investors should seek appropriate professional advice as soon as possible.

Further information on FATCA