FATCA

What is FATCA?

Foreign Accounts Tax Compliance Act (FATCA) was published by the United States of America Internal Revenue Service (IRS) on March 18, 2010. The aim of the law is to prevent the US taxpayer natural and legal persons from avoiding US taxation over their incomes and assets, and establish a transparent and traceable tax system.

Bilateral agreements that set forth mutual exchange of information between the states have been signed between the US and other countries as part of the adoption of FATCA. Accordingly, the 'Agreement to Improve International Tax Compliance through Enhanced Exchange of Information' was signed between Turkey and US in Ankara on July 29, 2015. With Grand National Assembly of Turkey’s (TGNA) approval of the bilateral agreement, this treaty has become binding as law and therefore, FATCA compliance has become a part of our domestic legislation.

According to the guidelines of FATCA, financial institutions outside the US need to identify their customers who are possibly US taxpayers and convey the asset details of these customers to T.R. Ministry of Finance, Revenue Administration (GİB).

As Garanti Pension, our responsibility for FATCA is as follows:

As Garanti Pension, we put maximum effort into adoption of not just national laws and other legal regulations but also all international agreements wherein Turkey is a party, to the extent of the local legislations.

According to FATCA, we have to identify our possible US taxpayer customers, in accordance with the criteria of the legislation; supply the documents and disclose the information of those concerned by the declaration, to GİB. Accordingly, just as all the institutions under the obligation of disclosure according to the treaty, we also request our customers to submit certain information and documents to verify their status under FATCA.

When will FATCA come into force?

The 'Agreement to Improve International Tax Compliance through Enhanced Exchange of Information' was signed between Turkey and US in Ankara on July 29, 2015. The agreement came into force after its approval at TGNA. However, T.R. Ministry of Finance’s declaration and completion of the respective bilateral sub-regulations are currently in progress. According to the bilateral agreements signed between the US and other nations, the dates of entry into force may vary. Meanwhile, responsibilities of the financial institutions obliged to disclose, are expected to become effective as of July 1, 2014.

Until TGNA’s approval of the bilateral agreement between Turkey and USA, and announcement of the secondary legislation amendments; we shall not disclose any information we’ve collected from our customers as part of FATCA, to any institution. Upon the bilateral agreement’s entry into force and local legislation, we shall convey the information we’ve collected to T.R. Ministry of Finance, Revenue Administration.

Who will be affected by FATCA?

Generally, we do not expect most of our customers to be affected by FATCA. The persons and companies that may be directly or indirectly affected by FATCA can be summarized as follows:

    • Natural persons with ties in USA (US citizens, US-born persons, green card holders, those with US contact/residence addresses or US phone numbers, US residents),
    • Legal persons with ties in the USA (Those with US addresses, found or based in US; for non-operative companies, at least one of the natural persons administrating the company must be a US citizen or resident),
    • Certain financial institutions (financial institutions that holds any account that can be accepted as assets on behalf of their customers. For Example; banks, investment companies)

What is required from our customers as part of the legislation?

Our US taxpayer customers (US citizens, US residents, green card holders etc. as stated above) are required to declare their status to Garanti Pension. In addition, our customers who are found to have the aforementioned ties with the US but declared that they are not taxpayers in the US, will be required to provide an additional document proving the signed form that supports their claim.

In order to prevent possible sanctions of authorized institutions to our customers due to sharing false or incomplete information/document, it is very important that our customers fully, correctly and timely share the required information and documents.

What happens if the information, documents and declarations required by FATCA are not submitted?

We shall declare the details of the customers who are found to have the aforementioned ties with the US but don’t declare their taxpayer status in the US (Those who do not sign the US Taxpayer Declaration Form or the Account Owner’s Declaration Form Stating US Taxpayer Status) and don't submit the requested documents to our company. GİB will send these details to IRS, as part of the agreement signed between the US and Turkey to regulate mutual exchange of information.

As per FATCA and the agreement to be signed between USA and Turkey regulating the mutual exchange of information; USA or companies authorized to withhold on behalf of the US will be authorized to exercise a withholding tax of 30% over the US-based incomes of the natural and legal persons who do not submit the information and documents stated for identification of their US taxpayer status and refuse to declare their taxpayer status.

Who will exercise the possible tax cut (withholding)?

As Garanti Pension, we’re not liable to make tax cuts (withholding) as part of FATCA. Withholdings will be carried out by the US or companies authorized to withhold on behalf of US.

Who are the customers and what are the details of these customers that will be declared to GİB as part of FATCA?

Persons to be declared according to FATCA are as follows:

    • Those who have declared their US taxpayer status and signed the respective declaration form (US Taxpayer Declaration Form),
    • Those who have been identified to have the aforementioned ties with the US, but avoid submitting information, declaration or documents,
    • Non-Participating Financial Institutions (Financial institutions that do not conform to FATCA).

Note: Customers who have declared that they are not taxpayers in the US and signed the 'Account Owner’s Declaration Form Stating US Taxpayer Status' will not be included in the periodic notification to GİB. However, upon request of the authorities licensed by the legislation, it will be possible to disclose information about the respective customers.

Details to be disclosed as part of FATCA:

Customer’s demographic information (ex; Name, Address, US Tax Identification Number -US TIN- and financial details (ex; Customer ID, total asset value of savings) will be disclosed to GİB.

Balance limits concerning the customer subject to declaration:

Persons who become our company’s customers on and after July 1, 2014 are considered as 'new' customers while those who have been our company’s customers prior to that date are considered 'current' customers.

    • Customers whose annual contribution is USD 50,000 or less, and whose lifetime contribution is not limited to a maximum of USD 1,000,000 or less,
    • Life insurance customers with current savings shall be subject to declaration.

Are all private pension companies part of FATCA?

As per the signature of the bilateral agreement between USA and Turkey and its entry into force, adoption of FATCA has become a legal obligation. Pension and insurance companies shall make reports, as part of the products and agreements that are not included among the exception.

Note: The stated limits, 'current' and 'new' customer definitions and extent may vary according to the amendments of the Ministry of Finance.

Where can we find detailed information about FATCA?

You can find detailed information about FATCA on IRS’ website at http://www.irs.gov. If you consider necessary, we recommend you to contact a professional tax consultant for detailed information and suggestions about FATCA.

Note: This page about FATCA has been prepared for our customers and it is intended for information purposes only; it will be updated according to the amendments, announcements and guidelines that has or will be published by the competent authorities (GİB and IRS). As Garanti Pension, we can not make a detailed assessment of US tax obligations and possible tax penalties of our customers. Therefore, we recommend you to contact a professional tax consultant for detailed information and suggestions about FATCA.

Sincerely,

As Garanti Pension is only obliged to comply with the responsibilities of the respective legislation, it shall not be held responsible for the errors on this informative page