FATCA and CRS Frequently Asked Questions (FAQs)
These Frequently Asked Questions (FAQs) provide answers to some of the most common questions with regards to the self-certification requirements for the Foreign Account Tax Compliance Act (FATCA) and Common Reporting Standards (CRS). The details provided are intended to assist in understanding the FATCA and CRS requirements and not to serve as tax advice.
If you have any further questions about the self-certification or are uncertain about your status or how you are impacted by these regulations, please contact your tax advisor or local tax authority.
What is FATCA and CRS?
FATCA stands for the Foreign Account Tax Compliance Act and was enacted in 2010 by the US Congress to overcome tax evasion by US taxpayers using foreign accounts. The regulation came into effect through an intergovernmental agreement (‘IGA’) between the South African Revenue Service (‘SARS’) and the US Internal Revenue Service (‘IRS’), whereby SARS agreed to transfer US accountholder information to the IRS in return for South African accountholder information.
CRS stands for the Common Reporting Standard and is a global version of the US FATCA. CRS is a set of standards created by the Organisation for Economic Co-operation and Development (‘OECD’), much like FATCA, and it too seeks to overcome offshore tax evasion by any person, including South African citizens, that have tax obligations, tax liabilities or tax residencies outside South Africa.
Both regulations require financial institutions to report to their relevant competent tax authority (which in South Africa is SARS) information on financial accounts held by:
Furthermore, where any entity has one or more controlling person(s) with tax obligations, tax liabilities or tax residencies outside SA and/or holds US citizenship, or is a US person or a US national, the entity may also be reported.
Any individuals or entities that have tax obligations, tax liabilities or tax residencies outside South Africa; or
Entities that are incorporated or organised or have a place of effective management outside South Africa or have tax obligations, tax liabilities or tax residencies outside South Africa.
Who is affected?
All Velocity Trade (‘VT’) clients/accountholders are affected in some way by FATCA and CRS by virtue of the fact that financial institutions are required to determine whether their accountholders have tax obligations, tax liabilities or tax residencies outside South Africa. To do so, financial institutions are also required to obtain additional information about their accountholders.
Financial Institutions are then required to determine the reasonableness of the information contained in the FATCA/CRS self-certification provided by accountholders by verifying this information against information that the client has already provided to the financial institution in terms of the Financial Intelligence Centre Act (‘FICA’). Should there be any discrepancies in the information, the client may be requested to provide supporting documentation to enable VT to update their information accordingly. This information is all reported to SARS.
Why am I being asked to supply a self-certification?
FATCA and CRS require financial institutions to request that all clients confirm whether or not they have tax obligations, tax liabilities or tax residencies outside South Africa.
In the case of entities, they are required to confirm if the entity:
- Is incorporated or organised or has a place of effective management outside South Africa; or
Has tax obligations, tax liabilities or tax residencies outside South Africa; and
- Whether any of their controlling persons have tax obligations, tax liabilities or tax residencies outside South Africa and/or hold US citizenships, or are US persons or US nationals.
What is a self-certification?
Self-certification is a statement by clients as to their tax residency and, in the case of an entity, it is a statement as to its tax residency, entity classification and the tax residency(ies) of its controlling person(s). In the case of clients with US ties, a VT self-certification must be provided along with the applicable IRS W-8 or W-9 form and, where applicable, proof of renunciation of citizenship.
Are there penalties for non-compliance?
SARS may impose penalties for non-compliance on both clients and financial institutions. This is effected through local law, being the Tax Administration Act.
Where can I find the definitions of terms contained within the self-certification form?
A glossary of FATCA and CRS terms that have been used in the VT self-certification form can be seen within the Client Portal on Trade Desk. Furthermore, a link to the FATCA and CRS terms has been provided in the email correspondence sent to clients.
If this proves to be inadequate, the FATCA and CRS regulations both contain a set of definitions and can be found on the IRS website (www.irs.gov) and on the OECD website (www.oecd.org). Please note, however, that the VT glossary of terms is for reference purposes only and does not constitute tax advice. Additionally, local legislation between jurisdictions may define the meaning of certain terms differently. Clients should consider such local legislation and seek appropriate independent tax advice, where necessary.
How can I determine where I am a tax resident?
You need not be registered for tax in a particular jurisdiction to be a tax resident of that jurisdiction. Tax residency is determined under the applicable jurisdiction’s local laws. Please contact a tax advisor if you have any questions or are uncertain about your tax obligations or tax residency. You can also obtain more information from the SARS website (www.sars.gov.za) where South African tax residency is concerned or the OECD website (www.oecd.org), which has some helpful information to determine tax residency outside South Africa.
What is a W-8 form?
A W-8 form is used to indicate an accountholder’s classification and tax residency for FATCA US reporting. There are many variations of the W-8 (W–8BEN, W–8BEN–E, W–8ECI, W– 8EXP, and W–8IMY), and each form is applicable to a different exemption regime. It is recommended that clients consult the IRS website (www.irs.gov) or a tax specialist if they are unsure which form is applicable to them; however, instructions at the start of the form are generally quite clear and indicate in which circumstances the form is relevant. The two most relevant forms for accountholders with possible US ties are the following: W-8BEN – Certificate of Foreign Status (foreign to the US) for Individuals; and W-8BEN-E – Certificate of Foreign Status (foreign to the US) for Entities.
What is a W-9 form?
A W-9 form is completed by US entities, US citizens or residents to confirm their US registration status with the IRS. The certification will also confirm whether a US entity is exempt from FATCA reporting.
Where do I get a W-8 Form or W-9 Form?
In the case of Individuals, a link to the IRS W-form applicable to you will appear in the self-certification form. In the case of Entities and Controlling Persons, the IRS W-forms have been provided within the email correspondence provided.
Should this not be the case, the forms can be downloaded from Client Portal on Trade Desk. Failing this, the latest version of the IRS W forms can be downloaded from the IRS website (www.irs.gov) along with instructions on which form (W8 or W9) is appropriate and how to complete it.
Must I complete a W-8 or W-9 form in addition to a self-certification?
It will depend on each client’s circumstances. The self-certification forms will indicate to you whether you need to complete a VT self-certification form only, or whether you will need to complete a VT self-certification form as well as a W-8 or W-9 form.
What happens if I don’t complete a self-certification, W-8 form or W-9 form or provide evidence of renounced citizenship?
As a financial institution in a country that is obliged to report in terms of FATCA and CRS, VT will be required to report to SARS all accountholders who fail to confirm whether they, as individuals, have tax obligations, tax liabilities or tax residencies outside SA, or they, as entities, are incorporated or organised or have a place of effective management outside SA and whether they or any of their controlling person(s) have tax obligations, tax liabilities or tax residencies outside South Africa and/or hold US citizenship, or are US persons or US nationals.
Where can I get more information?
To learn more about FATCA and CRS, as well as the status of jurisdictions committed to these regulations, please refer to www.irs.gov for FATCA; and to learn more about CRS and the status of jurisdictions committed to the standards, please refer to the www.oecd.org/tax/automatic-exchange/.
Why are we complying with FATCA / CRS?
VT is committed to ethical and compliant business practices and supports governments worldwide in their efforts to improve cross border tax compliance. Additionally, the requirements set out by FATCA/CRS have ultimately been enacted into local law in South Africa under the Tax Administration Act, 28 of 2011. VT is therefore legally obligated to comply with these requirements.
I have received more than one request to self-certify – what should I do?
We have tried to send only one communication to each client/accountholder. If you have received more than one request from us, it could be because you not only have one or more private trading account(s) with VT, but you could also be an authorised representative or controlling person at an entity that holds one or more trading account(s) with VT.
In such cases, you will need to complete one self-certification form for each capacity in which you hold the trading account(s); for example, if you hold one or more private trading account(s) and you are a controlling person for an entity with one or more trading account(s), you will need to complete one online Individual self-certification form, as well as one self-certification form as the controlling person. Similarly, if you are the authorised representative for the entity, you will need to complete one self-certification form for the entity.
The online self-certification form is not working properly.
Should you experience any issues with the online self-certification form, please contact your broker immediately so that the issue can be fixed. The contact details for your broker can be found within the Client Portal in Trade Desk.
I closed my trading account(s). Why am I receiving this?
If you had an active trading account within the date range required for the FATCA and CRS submission, VT still needs to know whether you have any tax obligations, tax liabilities or tax residencies outside South Africa that SARS needs to be aware of.
You seem to think I have foreign interests. I haven’t – my data must be wrong. How can I fix this?
Asking you to self-certify in terms of FATCA and CRS is not about whether or not you have any foreign interests. Rather it is a request to all VT clients to confirm whether or not they, as individuals, have any tax obligations, tax liabilities or tax residencies outside South Africa and/or hold US citizenship, or are a US person or a US national; and if they are an entity, whether or not they are incorporated or organised or have a place of effective management outside South Africa and whether they or any of their controlling persons have any tax obligations, tax liabilities or tax residencies outside South Africa and/or hold US citizenship, or are US persons or US nationals.
Is it sufficient that I have self-certified with another bank or Financial Service Provider (FSP)?
No, you are required to self-certify with each financial institution that you have accounts with.
Can I have a copy of what you report?
It is a good idea to do this as the VT self-certification form is a tax document.
If you are an Individual, you can download a copy of the online self-certification form that you completed directly from the Confirmation page that is displayed after submission. Furthermore, you can generate and download a PDF copy within Client Portal in Trade Desk.
If you are an authorised representative or controlling person for an Entity, a scanned copy of your completed PDF self-certification form will be available in Client Portal in Trade Desk once your self-certification form has been processed.