The HIRE Act and FATCA

30 September 2011

The Hiring Incentives to Restore Employment Act H.R.2847 (‘the Act’) was signed by President Obama on 18 March 2010 and introduced a number of revenue raising provisions affecting foreign entities and individuals with certain foreign assets. The Act included under Chapter IV, provisions for Foreign Account Tax compliance which had previously been incorporated within a proposed bill, the Foreign Account Tax Compliance Act in 2009 (‘FATCA’).

The provisions of the Act created significant changes in the rules relating to foreign trusts, funds and companies with withholding obligations and reporting requirements on the providers of these services, foreign financial institutions (‘FFI’).

With regard to trusts, these obligations and requirements will apply if a resident or citizen of the US is the settlor or grantor, a beneficiary and in some circumstances a protector of a foreign trust.

The Inland Revenue Service (‘IRS’) has issued notices on 27 August 2010 (Notice 2010-60), 8 April 2011 (Notice 2011-34), and 14 July 2011 (Notice 2011-53) containing guidance on the implementation of FATCA including account identification, information reporting, withholding requirements and registration timelines.

It is anticipated that Minerva will enter into an agreement with the IRS by June 30, 2013, to ensure that it will be identified as a participating FFI. This will allow withholding agents to verify that no withholding is required with respect to Minerva and entities managed by Minerva as of January 1, 2014.

Minerva will commence reporting as required from 2014.

Where so required, Minerva will commence withholding tax on U.S. source income (eg dividends, interest, etc.) from January 1, 2014.

Where so required, Minerva will commence withholding on all withholdable payments, including on gross proceeds, and pass-through payments by January 1, 2015.

Further regulations and notices with regard to FFI agreements and reporting forms are expected to be issued by the summer of 2012.

Complying with the FATCA requirements will be a major undertaking for financial institutions. Even with the phased-in implementation timelines provided by the notices, FATCA compliance will be challenging. Early planning is imperative and Minerva has identified a number of US advisers in the US, UK and Jersey who are able to advise us and our clients in order to meet these obligations and requirements.

This note is intended to provide a brief rather than a comprehensive guide to the subject under consideration. It does not purport to give legal or financial advice that may be acted or relied upon. Specific professional advice should always be taken in respect of any individual matter.

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