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Introduction

The Foreign Account Tax Compliance Act (FATCA) is part of the HIRE-Act that requires Foreign Financial Institutes (FFI) to report account holder information as well as financial accounts and there balances of US-citizens and -organizations. The foreign provisions are projected of $8.7 billion over 10 years and worldwide inflicting compliance cost from US$1-2 trillion considering introduction costs of approximately US$5-10 million per FFI.[i][ii]

In December 2012 KPMG conducted a survey with 129 executives at financial institutions. Some key findings are:

  • Median budget allocation is approximately US$250,000, although there are wide disparities in the amount organizations plan to spend, ranging from less than US$100,00 to more than US$100 million

  • Two-thirds anticipate FATCA implementation will take between six and 18 months, while 23 percent forecast it would require 18 months or more[iii]

From 1st of July 2014 on the new account due diligence/identification and the FFI Agreement becomes effective.

Focused Business Solution from SAP

Focused Business Solutions (FBS) are developed as SAP standard solutions that address the highly specialized business needs of customers in targeted markets. With the FBS SAP Tax Classification and Reporting for FATCA companies get enabled to comply with the law. As it is shown by the picture below it is possible to integrate Non-SAP Systems as well. Integration with SAP Deposit Management (DM), SAP Bank Customer Account (BCA) and SAP Loans Management (CML) come right out of the box.

Fatca_pic.png

Clerks can maintain the status of paper forms (for example W-8BEN, W-8IMY, etc.) in the system as well as tasks. It is possible to classify single business partner right after creation in the system or bunches of business partners’ in the End of Day processing with the batch classification run. This report uses the Parallel Processing Framework. For change of circumstances another report can be planned by adding it to the job chain. If a clerk changes a business partner events are generated. These events are processed by the second report. The FATCA status is stored in a new table as well as the classification log.  Indicia Checks (for example US-Address, Place of Incorporation, etc.) can be processed in any order in indicia check sets. These sets can be assigned to rule sets and types of business partners. All kinds of rule sets can be customized in the SAP solution SAP Tax Classification and Reporting for FATCA. Rule sets for the intergovernmental agreement (IGA model 1) and final regulations are already part of the SAP solution. 

Conclusion

SAP Tax Classification and Reporting for FATCA helps financial institutes to manage the challenges of FATCA. Today several customer projects are running and integrating the solution into their application landscape. Customers are very satisfied of the flexibility and extensibility of the solution (new indicia checks and account systems, any order of indicia checks,


[i] Gravelle JG. (2013). Tax Havens: International Tax Avoidance and Evasion
[ii] Altenburger, P; Huber, M.; Michaels, M.; Naville, M. (2010). FATCA: US legislation with broad consequences for many
[iii] KPMG (2012). Surveying the market: Are you ready for FATCA?
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