|Donald Vella||Mark Galea Salomone|
Malta financial institutions need to register with the Maltese Commissioner for Revenue for FATCA purposes even if they are non-reporting financial institutions. Each Malta financial institution is also required to register with the US IRS and obtain a Global Intermediary Identification Number (GIIN). The FATCA guidelines exclude non-reporting Malta financial institutions, deemed-compliant Malta financial institutions and active and passive non-financial foreign entities from registering with the IRS. In the case of a financial institution with a local client base that has a reporting obligation due to it holding US reportable accounts, a GIIN will be required.
Compliance and reporting
Once the requisite procedure and due diligence, as detailed in the FATCA regulations and FATCA guidelines, is carried out and a Malta financial institution has identified reportable accounts, it must report certain information to the Commissioner of Revenue (for instance: name, address, US tax information number and account balance). It is important to note that where a reporting financial institution has no information to report, a nil return is still required.
The FATCA guidelines state that significant non-compliance may be determined from either an IRS or the Commissioner for Revenue's perspective. Examples provided include: (i) repeated failure to file a return or repeated late filing; (ii) ongoing or repeated failure to register, supply accurate information or establish appropriate due diligence processes; (iii) intentional provision of substantially incorrect information; or (iv) deliberate or negligent omission of required information.
The FATCA guidelines do not provide a concrete definition of "transactions and schemes" carried out by persons to avoid the obligations placed upon them by the FATCA regulations. It is however intended that the phrase will be interpreted widely and the effect of the anti-avoidance regulation is that the FATCA regulations will apply as if the transactions and schemes had not been entered into.
Should a Malta financial institution fail to comply and report, the mechanics of FATCA will come into play and a 30% withholding tax imposed on the US source income will apply. The FATCA guideline has provided much needed context to the FATCA regulations as the Inland Revenue Department continues to encourage Malta financial institutions to comply with FATCA.
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