in-depth fatca 2015: risk & compliance
TRANSCRIPT
In-Depth:
FATCA 2015 Risk & Compliance
January 28, 2015
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Panelists
2
Kelli Wooten
Director of Client Services
Markit | CTI Tax [email protected]/pub/kelli-wooten/5/96b/92b
Introductions – The Panelists
Joe Flynn
Chief Strategy Officer, Lavante Inc
http://www.linkedin.com/in/jflynn10
3
Josh Morrison
Senior Solution Consultant, Lavante Inc
www.linkedin.com/in/joshmorrison
Who is CTI
Markit | CTI Tax Solutions is the leader in cutting edge global tax
technology, consulting, and outsourcing services specializing in
information withholding and reporting and has over 15 years of
experience in developing and customizing tax compliance software for
clients.
Many major multi-national corporations and nine of the ten largest
financial institutions in the world are using all or a combination of Markit
| CTI Tax Solutions offerings to satisfy their daily compliance needs.
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About Lavante
13 years delivering supplier management
software solutions
– 125+ Fortune 1000 customers
– Patented technology and processes
– Long-term customer relationships
Lavante Connect™ Platform
– SIM: Reduces Risk & Enhances compliance
– Automation of supplier qualification and VMF cleansing
– Recovery: Identifies open credits and provides highest
recovery rate quickly
– Open platform enables 3rd party development and
integration partners
– >2 million supplier connections in database
Speed to Value
– Ease of deployment
– Quick outreach and immediate vendor compliance
– Ease of use
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• SaaS Enabled
• Open API
• Multi-Language
• SSAE16
• SOC2 Type2
• ERP Integration
• User Controls
• SSO Integration
• Reporting & Analytics
Agenda
• Understand how FATCA may affect you and your company
• How to address risk and compliance
• Avoid risks and penalties by learning required steps for IRS
regulatory compliance
• Design and deploy an automated FATCA compliance program
– Accelerate supplier data collection and validation with automation
technology to save time and reduce costs
– Automatically and securely collect, store, and manage supplier data
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What is FATCA?
• Foreign Account Tax Compliance Act - which is designed to combat offshore tax evasion by US persons
• The goal of FATCA is to supplement existing Form 1099 information reporting requirements by requiring extensive, additional due diligence requirements when making certain types of payments
• Impacts both US and non-US companies
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FATCA’s Impact on Vendor Payments
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• FATCA is designed to minimize any impact on payments to suppliers; however, organizations still must:
–Identify withholdable payments
–Categorize non-U.S. payees
–Withhold and report as required
Organizations also must comply with all existing U.S. information reporting and withholding requirements such as backup withholding, Form 1099 reporting, U.S. non-resident withholding, and Form 1042-S reporting
What payments will be impacted?
• Generally, payments made in the ordinary course of a withholding agent’s business are excluded from FATCA.
• Excluded non-financial payments include:
– Payments for services, rents, royalties, software licenses, transportation, freight, prizes and awards, and interest on accounts payable.
– Goods are not FDAP income and would therefore never be considered a withholdable payment.
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Watch out for treasury payments such as those made in connection with a
forward, futures, options or notional principal contracts, custodial fees,
insurance premiums, and bank brokerage, and investment advisory fees
as those are NOT excluded.
How Does FATCA Effect Us?
• Impacts on businesses and vendors
– US tax forms are lengthy and confusing, particularly for non-native
English speakers. Expect lots of questions and potentially incorrect and
incomplete documentation
– Payment delays
– P/L impact – under-withheld tax, penalties, interest
– Risks on all key stakeholders in organization includes operations,
technology, risk, legal, tax, and others
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PAYFATCA TAXPENALTIES
Managing Your Risk
• Controls
• Automation
• Scalability
• Collaboration
• Ease of Use
• Cost/Benefit Value
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Due Diligence
• FATCA is an enhanced due diligence regime.
• If making a withholdable payment, you must:
– Collect a Form W-9 or W-8 from the vendor;
– Validate the form against all other information in your files;
– Check for U.S. indicia or other conflicting information;
– Monitor for any changes in the information included in the form;
– Re-solicit the documentation when it expires; and
– Retain the form in accordance with document retention policies.
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Did you know?The new Form W-8BEN-E for entities is eight pages long. Lavante can help you and
your suppliers by electronically collecting a user-friendly, substitute Form W-8 which
meets your compliance responsibilities and stores additional data for reporting
purposes.
Withholding and Reporting
• FATCA withholdable payments made to the
following vendors are subject to 30% FATCA withholding:
– ANY undocumented vendor;
– Nonparticipating FFIs;
– Passive Non-Financial Foreign Entities failing to disclose
substantial U.S. owners.
• FATCA withholding cannot be reduced by statute or by
treaty.
• Reporting would occur on Form 1042 and Forms 1042-S.
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Required Steps
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Best Practices:• Update validation processes for new forms W-8
and W-9, additional U.S. indicia.
• Learn how to complete significantly revised Forms
1042 and 1042-S.
• Update policies, procedures, and workflow.
• Review payments to determine which may be
subject to FATCA withholding.
Is Your Company at Risk?
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• Keeping up with new regulations
• Collecting and validating compliance
documents
• Tracking supplier compliance
• Managing all supplier documents
Are you…
• Lack of money for AP projects (cited by 45.1%)
• AP is far down the overworked and understaffed IT department’s
list of things to do and departments to please
– 44.4% cited limited IT resources
• Lack of management support (cited by 34%)
– The bills are getting paid
– They have no idea what’s going on
behind the curtain
• And, lurking within that “other” is the quite basic reason that
many respondents just don’t know where to start!
Compliance Obstacles are Always the Same
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Automate Compliance
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• Leverage filtering tools to determine documentation
based on supplier or payment type
• Utilize automated outreach to suppliers to
accurately and efficiently collect data
• Implement auto-validation service against TIN,
OFAC, SDN, address and other 3rd party databases
– Receive alerts about non-compliant suppliers
• Facilitate reporting via dashboards that tracks
progress on strategic projects such as:
– ACH, COI collection and tracking
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Best Practice Controls
• Define Business Requirements
– Adhere to regulatory requirements
– Minimize impact on existing business
– Compliance with new business
• Create ROI/Risk Mitigation Model
– Cost of doing nothing
– Make/Buy analysis
• Create & Deploy Corporate Compliance Program
– Support defines requirements and ROI/risk model
Establish Internal Controls and Tolerances
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• Collaboration: Outreach, Workflow, Streamline, Communication
Retention
• Reporting & Analytics: Dashboards to tracks progress on strategic
initiatives
• Filtering Tools: Understand Supplier Base for
Analysis, Withholding, and Reporting
• Auto-Validation & Alerts: Continually monitors
suppliers against TIN, OFAC, SDN, address
and other 3rd party databases
• Document Management: Contract, Diversity,
COI, W-8/W-9
Auditable Governance Process
IRS Form W8 / W9 Collection
• W-9 and W-8 form collection
• Form expiration tracking
• Approval workflow, alerts and notifications
Form W8 IRS Validation Status & Tracking
• Validation process tracking
• Validated result and withholding rate
• Submitted digital W-8 form archives and tracking
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Legal Entity Classification and Validation
• Business structure type and country of registration
• Company legal name and US(TIN)/EU(VAT) validation
• Foreign address collection, USPS address validation
FATCA Advanced Features (CTI Integration)
• Self-Certification (Vendor Tax Portal – CTI)
– W-8 form type identification
– Eligibility for withholding and withholding rate
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Documentation and Reporting
• W-9 and W-8 form archives
• Advanced search, reporting, and tracking
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Lavante-CTI Solution Key Benefits
• Simplify compliance procedures for both companies and
vendors
• Ensure compliance for both newly on-boarded vendors as well
as existing vendors
• Workflow frameworks with controls and auditing
• Automated W-9 and W-8 form collection
• Document management and reporting
• Advanced compliance measure for vendor self-certification and
real-time validation
Call to Action Summary
• Easy implementation
– SaaS Cloud-based software for rapid deployment
– Simplify procedures to ensure compliance
• Assures compliance
– Enable compliance for both businesses and vendors
– Automated process for W-9 and W-8 collection
– Document management and reporting
– Ongoing monitoring and control
– Advanced compliance with real-time validation
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Q&A / Trial Offers Lavante.com/asktheexperts
Q&A
Next Step: lavante.com/asktheexperts
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Kelli Wooten
Director of Client Services
Markit | CTI Tax [email protected]/pub/kelli-wooten/5/96b/92b
Josh Morrison
Senior Solution Consultant, Lavante
www.linkedin.com/in/joshmorrison