Foreign Account Tax Compliance Act (FATCA)

FATCA stands for the Foreign Account Tax Compliance Act (FATCA). It was signed into law in 2010 as part of Hiring Incentives to Restore Employment (HIRE) Act.

FATCA is designed to prevent tax-evasion by U.S. citizens or residents holding foreign accounts or offshore investments. Under the FATCA regulations, foreign financial institutions (FFIs) must report to the IRS information about financial accounts held by U.S. taxpayers, or by foreign entities in which U.S. taxpayers hold a substantial ownership interest.

To be FATCA compliant, FXCM must register its own FFIs with the IRS. In addition, FATCA regulations require FXCM to review existing onboarding and withholding processes and enhance them to comply with the regulations.

As part of an enhanced client onboarding process, additional documentation may be requested for clients holding accounts at FXCM. For instance, FXCM may need to obtain tax forms (i.e. W9/W8 series documents), from both new and existing accountholders in order to identify and report the client's tax classification.

In order to determine if tax withholding is applicable, FXCM must authenticate the residency of its accountholders. For instance, if an account is held by a non U.S. citizen or non U.S. registered business entity, FXCM may require a Certification of Foreign Status, such as Form W8-BEN or W8-BEN-E for the account. Similarly, if an account is held by a U.S. citizen, U.S. resident alien or U.S. business entity, the accountholder is required to certify his/her tax status by completing a Form W-9 or equivalent.

U.S. citizens or corporations may complete a W-9 form.Instructions for non-US citizens or corporations can be found in detail here, and are generally outlined below for your convenience:

• W-8BEN – non-US individual (unless individual falls under below classification)
• W-8BEN-E – non-US entity (unless entity falls under below classification)
• W-8ECI – non-US person with claim that income is effectively connected with the conduct of a trade or business in the United States
• W-8IMY – non-US intermediary, non-US flow-through entity, or non-US trust
• W-8EXP – non-US government, international organizations, non-US central banks of issue, non-US tax-exempt organizations, non-US private foundations, or governments of US possessions

The outline provided above is not intended to be exhaustive and is not warranted or guaranteed by FXCM as to its completeness or accuracy. For assistance with selecting and completing the tax Form applicable to you, please consult a qualified tax professional.

Under the new FATCA regulations, withholdable payments do not include foreign exchange payments. Although gains on foreign exchange contracts are generally reported to the IRS as gross proceeds, FATCA regulations appear to apply to proceeds from the sale or disposition of property capable of producing interest or dividends from sources within the United States. FXCM potentially may withhold on dividend equivalent amounts you receive on CFD investments depending on their specifics. Of note, this is subject to change if FATCA regulations are amended or revised. Please consult a qualified tax professional for additional assistance.

An Intergovernmental Agreement (IGA) is a bilateral agreement between the U.S. government and a country's tax authority that facilitates compliance with FATCA. More than 100 countries have concluded an IGA with the US government.

* In countries with a Model 1 IGA, FFIs will comply under local legislation and report to their local tax authority; in turn, the local tax authority will exchange information with IRS. * In countries with a Model 2 IGA, FFIs will comply with local legislation to enter into agreements with, and report directly to the IRS.

The IRS website offers additional information regarding FATCA compliance. You may also reference the U.S. Department of Treasury website for supplementary information on IGAs.