FATCA Newsbrief

FATCA Newsbrief
Global information reporting
16 October 2014
Summary of the parliamentary debate
on the Netherlands – US
Intergovernmental Agreement
In brief
On October 14, 2014 the Dutch government released the report of the parliamentary
debate on the ratification of the NL – US IGA in regard to FATCA. The report
contains several questions and answers which provide more clarification regarding
the NL – US IGA and the implementation thereof. Topics that are included in the
report are, amongst others, the treatment of holding companies of Financial
Institutions, the concept of a customer in the Investment Entity definition and
various broader legislative issues.
The most important topics are summarised below accompanied by our observations.

Customer concept in the Investment Entity definition
Several questions were raised as part of the parliamentary debate. One of these
questions involved the definition of 'customer'. The State Secretary was
presented with a specific case of an entity that has one director who is also the
sole shareholder (directeur-grootaandeelhouder (‘dga’)) and the only activity of
this entity is investing in shares. The question was raised whether this entity
should be classified as an Investment Entity, and whether the director can be
seen as a customer.
The State Secretary indicated that the Investment Entity definition refers to the
definition of financial institution in the Financial Action Task Force (FATF)
recommendations. The FATF definition states that there has to be a client
relationship. The report indicates that the Dutch government does not see a
client relationship between the entity and the sole director/shareholder.
Nevertheless, it is noted that if the investment activities of the entity are
performed by a professional third party a client relationship exists between this
professional third party and the entity/director. In this case both the professional
third party and the entity itself qualify as Investment Entity.
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PwC Observation:
The above can be seen as welcome guidance for the interpretation of the
Investment Entity definition. Prior to the confirmation by the State Secretary it
was unclear whether or not a sole director/shareholder (dga) whose wholly
owned entity was investing in financial assets should be considered a customer
and the entity an Investment Entity. The State Secretary has clarified that the
relationship between an entity and its (sole) shareholder is not regarded as a
client relationship. This has been the subject of many discussions and led to
uncertainty especially considering the upcoming registration deadline for
Dutch Reporting Financial Institutions on December 31, 2014.

Holding Company and Treasury Center
During the Parliamentary discussions, it was asked if the Dutch government,
similar to the United Kingdom (UK), intends to treat holding companies and
treasury centers of financial groups as Financial Institutions.
The State Secretary indicated that the UK has a binding prescription for entities
that fall under this definition. The Dutch government clarified that it intends to
incorporate a provision in the FATCA guidance which provides holding
companies and treasury centers in financial groups with the option to qualify
themselves as a Financial Institution pursuant to the US FATCA Regulations.
The rationale behind this option is that the Dutch government provides Dutch
parties with the possibility under article 4.7 NL – US IGA to use definitions from
the US FATCA Regulations which are more favorable. The government received
indications that some parties may find it more favorable to classify their holding
company or treasury center as a Financial Institution, since that would enable
those entities to be registered as Lead FI with the IRS.
PwC Observation:
Flexibility is provided by allowing parties to opt for application of this FI
definition, which is especially welcome in light of the registration of FI groups
with the IRS.

Acceptance of US customers
In an attempt to minimize the impact of FATCA, it is possible that Financial
Institutions no longer accept customers that classify as US Persons and/or end
their existing relationships with US persons. In this respect, the question came
up whether the government has a solution to avoid such actions.
The State Secretary indicated that the Dutch Bankers Association informed the
Dutch banks in an early state about FATCA. Furthermore, he specified that the
NL – US IGA facilitates Financial Institutions in the Netherlands to comply with
FATCA in a cost efficient way. The Dutch government therefore expects that
Dutch Financial Institutions will comply with the FATCA obligations without
limiting the services provided to their clients.
PwC Observation:
The Dutch government indicates that complying with FATCA should not lead to
rejecting US persons as clients. Also, please note that refusing to accept US
persons does not exempt Financial Institutions from the requirement to comply
with FATCA.
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
Reciprocity
Various questions concerning the reciprocity provision in the NL – US IGA were
submitted. These questions focused both on the difference in information
exchanged by the Netherlands and the US, and the manner in which the US will
reach an equal level of information exchange.
It is expressed by the State Secretary that, by the reciprocity provision, the US
are bound to exchange information on an equivalent basis, and that the
Netherlands and the US will evaluate the progress on this topic. The US already
have to exchange information on income regarding the year 2014, where the
Netherlands has a phased-in introduction of data elements. However, the scope
of financial accounts which the US has to report to the Netherlands is more
limited than vice versa, and the US are also not required to report on ultimate
beneficial owners. The Dutch government nevertheless expects that the US will
eventually exchange information on an equivalent level, because of broader
legislative developments such as the OECD’s Common Reporting Standard
(please be referred to the following topic for more information). It is noted that
the 2014 US budget proposal includes a plan to come to full reciprocity for
information exchange.
PwC Observation:
Questions regarding the reciprocity of information exchanged under the NLUS IGA have been raised for a long time. The State Secretary sees positive
developments in this respect in both the international momentum that Common
Reporting Standard creates and the initiatives in the US to come to full
reciprocity.

Legislative context & future developments
The report also provides a clarification of more general legal issues, such as:
whether the Netherlands is going to exchange information with Luxemburg and
Switzerland; how the NL – US IGA relates to EU Directives on data protection
and the legal status of the NL – US IGA; and how the data protection in the US is
regulated.
The State Secretary indicated that the OECD used the momentum of FATCA to
develop the Common Reporting Standard. The Dutch government has actively
contributed to this development, and it is expected that about 40 countries will
begin to exchange information in 2017 followed by another 20 countries in 2018.
The Common Reporting Standard will be implemented in EU Directive
77/799/EU (Directive on Administrative Cooperation). Please see our newsflash
regarding the political consensus reached on the revised Directive on
Administrative Cooperation of 16 October 2014. This Directive also covers the
exchange of information with Luxembourg and the EU Commission is engaged in
an active dialogue with Switzerland with the intent to achieve similar automatic
exchange of information.
With respect to privacy regulation, the question came up whether the
Netherlands Financial Institutions may obtain US TINs (Tax Identification
Numbers) from clients. The State Secretary answered that Financial Institutions
already may store US TINs based on current legislation. In addition, it is
intended to include a provision specifically regulating data exchange under the
NL – US IGA in Uitvoeringsbesluit Wet Internationale Bijstandsverlening per 1
January 2015.
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PwC Observation:
It is clear that the Dutch government sees FATCA and the Common Reporting
Standard as two systems that are very much connected. No legal impediments
are foreseen regarding the various privacy regulations and the confidential
treatment of information that is exchanged.

Timing of Dutch Guidance
Furthermore, it was stated by the State Secretary that the Dutch Guidance
(FATCA leidraad) is expected to be completed before the end of 2014.
PwC Observation:
In general we note that the number of questions regarding specific definitions
and procedures was very limited. We expect that more questions will be raised
when parliament is presented with the proposal to incorporate the NL – US
IGA in Dutch law. The Dutch Guidance will provide for more clarity and
elaboration on the various definitions and procedures that are included in the
NL – US IGA.
Additional references
The full notes (in Dutch) can be found at:
http://www.rijksoverheid.nl/documenten-enpublicaties/kamerstukken/2014/10/14/kamerbrief-goedkeuring-fatca-verdrag-notanaar-aanleiding-van-het-verslag.html
The Dutch translation of the IGA can be found at:
https://zoek.officielebekendmakingen.nl/trb-2014-128.html
For more information about FATCA, please visit our web site at
http://www.pwc.nl/fatca and http://www.pwc.com/us/fatca
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For more information, please contact:
Dutch Contacts
Remco van der Linden
+31 (0)88 792 7485
[email protected]
Clark Noordhuis
+31 (0)88 792 7244
[email protected]
Martin Vink
+31 (0)88 792 6369
[email protected]
Robert Jan Meindersma
+31 (0)88 792 6186
[email protected]
Sander Spoek
+31 (0)88 792 3314
[email protected]
Babette Ancery
+31 (0)88 792 4830
[email protected]
Corina Scott
+31 (0)88 792 6982
[email protected]
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