FATCA (Foreign Account Tax Compliance Act) is moving into focus for insurance companies as one more regulatory issue requiring urgent action. The U.S. government is expanding its regulatory instruments with FATCA to close loopholes in the tax system. This will be achieved in particular by expanding the reporting requirements for financial institutions outside the United States.
In future, to comply with the new reporting requirements, insurance companies will need to distinguish between the U.S. and non-US persons, collect and report relevant data from U.S. customers and -- if applicable – apply a withholding tax at source. Accordingly, insurers will be obliged to:
- Identify U.S. persons in their customer base
- Identify affected products and thresholds for minimal amounts
- Adapt business processes to enable ongoing monitoring of status changes of policyholders and to some degree also of beneficiaries
- Disclose required information annually to the IRS or local authorities in accordance with bilateral agreements
- Deliver additional contract-related information upon request
- Set up a compliance program to support the "Responsible Officer".