Showing posts from April, 2014

What FATCA means to Singapore's financial institutions


FATCA’s Impact on Singapore

FATCA is a term that must be familiar to anyone who deals with US institutions or US persons. Few of us in the International Business Structuring space however, truly grasp the implications. It is hoped that this brief article not only helps in further our understanding of FATCA in general, but also our understanding of how it may impact financial institutions here in Singapore.

By way of background, a 2008 Senate Homeland Security and Governmental Affairs Permanent Subcommittee report on Tax Havens estimated that the United States loses about $100 billion in tax revenue each year as a result of offshore abuses. Fingers tend to be pointed at concealed and undeclared accounts held by U.S. tax payers or their controlled foreign entities in particular. It is therefore natural that the government would seek to focus on taxpayers that structure their activities to avoid reporting the income from offshore accounts. In March 2010, the Hiring Incentives to Restore Employment (HIRE) Act introd…

FATCA and Singapore

I began thinking of FATCA compliance on the part of money managers after last month’s report that 2 Canadian money managers resident in the Caymans and the Turks and Caicos islands were arrested when they visited Miami. Among other things, a statement from the DOJ noted that the accused “represented that the funds would not be reported to the US government”. The situation of these 2 accused goes much deeper than that but I still could not help but wonder about the responsibility of money managers to report the activities of their US clients. When I say money managers, I am thinking about fund GPs, trust companies, asset managers etc.

Have a look at 26 CFR 1.1471-5 - DEFINITIONS APPLICABLE TO SECTION 1471 and pay attention to examples 7 and 8 below which suggest that money managers organized as separate legal entities rather individuals may be considered FFIs (foreign financial institutions) and since Singapore is not yet an IGA (inter-governmental agreement) model 1 jurisdiction, the…

Four Things to Know about Net Investment Income Tax

If it's one thing I have been getting questions about, it's the new Net Investment Income Tax as calculated on Form 8960.  Here's something from the IRS on it...

Starting in 2013, some taxpayers may be subject to the Net Investment Income Tax. You may owe this tax if you have income from investments and your income for the year is more than certain limits. Here are four things from the IRS that you should know about this tax:

1. Net Investment Income Tax.  The law requires a tax of 3.8 percent on the lesser of either your net investment income or the amount by which your modified adjusted gross income exceeds a threshold amount based on your filing status.

2. Net investment income.  This amount generally includes income such as:
interestdividendscapital gainsrental and royalty incomenon-qualified annuities
This list is not all-inclusive. Net investment income normally does not include wages and most self-employment income. It does not include unemployment compensation, Soci…

High Frequency Trading and Ethics

So a guy in the U.S. goes onto 60 Minutes last weekend, to help promote his book on High Frequency Trading (HFT) and all hell breaks out. In Trinidad, The Chief Risk Officer of a local bank allegedly uses insider info to profit from an IPO.

On the surface, these events seem disconnected but in my mind they are connected. We are in the final stages of a trend that began when the Rothschilds, by legend, used carrier pigeons to trade on the outcome of the Battle of Waterloo. The nature of this game requires that players leverage information in a way that blurs the lines of law and ethics. This line feels like a moving target as the various governments keep their finger on the pulse of public opinion. So what is considered shrewd business practice today is suddenly considered illegal tomorrow.

So in the U.S., the SEC has opened investigations into HFT. In Trinidad, after the media publicized the circumstances, the guy got fired and is now the subject of an investigation.

As I nev…