Compliance

Foreign Account Tax Compliance Act (FATCA)

The United States of America law the object of which is to fight tax evasion of North American tax payers not exempt from taxes (US Persons) in relation to income or other investment gains outside that country.

Non-Financial Entity: A non-financial entity within the scope of FATCA (hereinafter referred to as NFFE) outside the United States that is not comprised in the definition of financial entity within the scope of FATCA, as provided in the FATCA Final Regulation – U.S. Treasury Regulations or any other non-US entity established in Cabo Verde or in any other associated jurisdiction which is not a Financial Institution.

 

Active Non-Financial Entity: Active NFFE means any non-financial entity which is not considered as a US Person and which meets any of the following criteria:

  1. Less than 50% of the NFFE gross income calculated for the preceding calendar year or for any other reporting period results from passive income (dividends, interests, rents and royalties – which do not directly result from a given activity or business – annuities or any other passive income) and less than 50% of the assets held by the NFFE during the same period produce or are held for the production of passive income.
  2. The entity is listed on an established securities market, or the NFFE is an entity related with an entity whose shares are regularly traded on an established securities market.
  3. The entity has been incorporated in a U.S. Territory and all the beneficiaries of the payments/income are residents of that U.S. Territory.
  4. The entity is a Government (other than the American Government), a political subdivision of this Government (including one State, Province, District or Municipality) or a public body performing the tasks of that government, or a political subdivision, the Government of a U.S. Territory, an international organisation or an entity wholly owned by one of the entities referred in this paragraph;
  5. The activity of the entity consists on (in the whole or in part) holding or providing financial services to entities the activity of which is different from the activity of a financial entity, except an entity incorporated as an investment fund, venture capital fund or any other investment vehicle the purpose of which is to acquire or to finance entities to hold shareholdings as investment in financial assets;
  6. The entity is a start-up entity that wishes to start (or has started) the practice of an activity different from the activity of a financial entity. These entities cannot be classified with this statute 24 months after the date of their initial organisation;
  7. Entities that have not been Financial Institutions for the last five years and that are in liquidation of the respective assets or in reorganisation, with the purpose to continue or to restart a business activity other than the business of a Financial Institution;
  8. Entities with the capacity to report information on their U.S. Substantial Beneficial Owners directly to the IRS (Income Reporting Services), in substitution of the agents liable for withholding;
  9. The entity meets all the following requirements:
    1. The entity is established and exclusively carries out in its jurisdiction of residence activities for religious, charitable, scientific, artistic, cultural, sporting or educational purposes; or is established and carries out in its jurisdiction of residence the activities of a professional bar association, corporate association, chamber of commerce, workers’ union, agricultural or horticulture organization, civic organization or of an organization that exclusively carries out activities for the promotion of social welfare;
    2. The entity is exempt from income tax in the jurisdiction of residence;
    3. The entity has no shareholders or members with rights or shareholdings over its income or assets;
    4. The laws applying in the jurisdiction of residence of the NFFE or the by-laws of the NFFE do not allow the distribution of profits and assets, or their application to the benefit of natural persons or entities whose activity is not for charitable purposes, save as when within the scope of the development of charitable activities of the NFFE, or as payment of services rendered, or as payment of assets acquired at the market value by the NFFE; and
    5. The laws applying in the jurisdiction of residence of the NFFE or the NFFE by-laws require that, upon liquidation or dissolution of the NFFE, all assets are distributed in favour of the Government of the jurisdiction of residence, its political subdivisions, governmental entities or non-profit organisations.

 

Passive Non-Financial Entity: Passive NFFE means any NFFE that is not:

  1. An active NFFE,
  2. A company or a foreign trust liable of withholding under the terms of the applicable provisions of the FATCA Final Regulation – U.S. Treasury Regulations.

 

Financial Entity: For the purposes of FATCA, are classified as financial entities all the entities that:

  1. Accept deposits in the ordinary course of their banking activity or similar;
  2. Own, as a substantial part of their activity financial assets on account of third parties;
  3. Comply at least with one of the requirements set out in subparagraphs a, b or c:
    1. Practice/carry out as their main activity at least one of the following activities for (or on account) of customers:
      1. Negotiation of monetary market instruments (cheques, bills, deposit certificates, derivatives, etc.), foreign currency, foreign exchange rates, interest rates, index-based instruments, transferable securities or commodities;
      2. Natural or legal person’s portfolios management; or
      3. Investment, administration or management of funds, cash or financial assets on account of third parties.
    2. Perceive a gross income primarily ascribable to investment, reinvestment or negotiation of financial assets managed by any of the entities hereinabove mentioned;
    3. Are (or act as) a collective investment undertaking, mutual fund, exchange traded fund, private equity fund, hedge fund, leveraged buyout fund, venture capital fund or other similar investment vehicle whose purpose is to invest, reinvest or negotiate financial assets; or
  4. Are life insurance companies (or holdings of a group that includes an insurance company) with cash-value policies or annuities;
  5. Are holding companies or a treasury centre held by a group that includes at least one of the entities set out in paragraphs 1., 2., 3.b. or c and 4, or which have been created in connection with (or to the profit or advantage of) a collective investment undertaking, mutual fund, exchange traded fund, private equity fund, hedge fund, leveraged buyout fund, venture capital fund or other similar investment vehicle created with a strategy of investment, reinvestment or negotiation of financial assets.