Foreign Banks Demand FATCA Forms

Over the last few months, many Germans living in the United States and even some who merely have a vacation home here started receiving letters from their non-U.S. banks, pointing out that under the Foreign Account Tax Compliance Act (FATCA) the banks are obligated to verify certain client information to comply with their reporting requirements under FATCA.

In their letter, the banks often enclose a variation of Form W-8BEN or W-9 and sometimes both. This has led to much confusion because the bank’s customers are not familiar with these forms and their significance. Many end up filling out both Forms or, alternatively, none at all.

Both Forms W-8BEN and W-9 are used to verify certain basic information, such as names, addresses and United States tax ID numbers (if one exists).

The significant difference is that Form W-9 is used to certify that the signer is a U.S. Person within the meaning of the Internal Revenue Code and will result in the reporting of the income, by the bank, to the Internal Revenue Service

Form W-8BEN on the other hand, certifies that the person is a non-U.S. Person and therefore (usually) is not subject to information reporting by the banks. Failure to return the appropriate Form to the bank will result in the customer being classified as a recalcitrant account holder which will result in the bank withholding 30% of the income and transmission of such amount to the IRS.

It is therefore very important that the bank’s customers timely complete the correct form to avoid complications down the road.

Disclaimer: This article is for general information only and is not intended as legal advice.