FOREIGN ACCOUNT TAX COMPLIANCE ACT (FATCA)

IMPLICATIONS FOR CLIENTS

CONTENT INTRODUCTION 3 GLOBAL FRAMEWORK 3 APPLICATION IN BELGIUM

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LEGAL OBLIGATIONS 5 OVERVIEW 5 STEP 1: DEFINE FATCA CLASSIFICATION

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STEP 2: OBTAIN CERTIFICATION FROM SPECIFIC CLIENTS

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STEP 3: REPORTING INFORMATION ON ACCOUNTS HELD BY U.S. TAXPAYERS

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PRACTICAL IMPLICATIONS 10

2  |  CORPORATE & PUBLIC BANK

INTRODUCTION

GLOBAL FRAMEWORK • The Foreign Account Tax Compliance Act (FATCA) is a U.S. legislation that has entered into effect on 01/07/2014, aiming to combat cross border tax evasion by U.S. taxpayers. • U.S. Financial Institutions are required to certify that counterparties that are Foreign (i.e. non-US) Financial Institutions are FATCA-compliant. In the event the Foreign Financial Institution is not FATCA-compliant, the U.S. Financial Institution must apply a withholding penalty of 30% on all payments to the counterparty.

• In many countries local privacy and bank secrecy laws prohibit financial institutions to share information on their clients with the IRS. In order to implement FATCA into local law and allow for the exchange of information the U.S. has negotiated bilateral agreements with numerous countries, including Belgium.

• In order to be FATCA-compliant the Foreign Financial Institution needs to identify all U.S. taxpayers amongst its clients and report specific information on the accounts held by these clients to the U.S. Internal Revenue Service (IRS). In addition, the Foreign Financial Institution must in turn certify that its counterparties are FATCA-compliant as well (or otherwise apply the 30% withholding penalty).

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APPLICATION IN BELGIUM • The FATCA-agreement between Belgium and the U.S. has been signed on 23/04/2014 and is expected to be ratified into local law in the coming months. • Instead of reporting directly to the IRS, Belgian financial institutions will report information on accounts held by clients that are U.S. taxpayers to FOD/SPF Finance, who will in turn provide this information to the IRS. • Guidance Notes to the Belgian FATCA-agreement are expected to be published by FOD/SPF Finance in the coming months. These allow for a uniform application of the FATCA regulations by Belgian financial institutions.

LEASING OPÉRATIONNEL OU LEASING FINANCIER ? U.S. INDIVIDUALS

Identify accounts held by clients that are U.S. taxpayers

U.S. LEGAL ENTITIES

PASSIVE (HOLDING OR PATRIMONIAL ENTITY), NON-U.S. LEGAL ENTITIES WITH U.S. CONTROLLING PERSONS

4  |  CORPORATE & PUBLIC BANK

Yearly reporting of accounts held by clients that are US taxpayers

BNP PARIBAS FORTIS

U.S. INDIVIDUALS

BELGIAN TAX ADMINISTRATION

Intergovernmental agreement

Echange of information

U.S. INTERNAL REVENUE SERVICE

LEGAL OBLIGATIONS

OVERVIEW FATCA INTRODUCES THE FOLLOWING OBLIGATIONS FOR BELGIAN FINANCIAL INSTITUTIONS: 1. Define FATCA classification for each client Based on information the client has provided to the financial institution and based on publicly available information a FATCA classification needs to be defined for all clients (legal entities and individuals)(*), according to the classification criteria defined in the agreement.

2. Obtain certifications from clients with specific FATCA classifications Financial institutions are required to obtain a certification from clients with specific FATCA classifications (indicating they are potential U.S. taxpayers) in order to determine the client’s taxpayer status.

3. Annual reporting on accounts held by U.S. taxpayers Specific information on the accounts held by clients that are identified as U.S. taxpayers must be reported to SPF/ FOD Finance on an annual basis, who will in turn report this information to the IRS.

(*) This presentation focusses exclusively on the FATCA obligations for legal entities.

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STEP 1: DEFINE FATCA CLASSIFICATIONS Financial institutions must define a FATCA classification for each entity client according to the following fixed logic:

U.S. ENTITY?

All entities with a U.S. place of incorporation and/or a U.S. residence or correspondence address.

NO FOREIGN FINANCIAL INSTITUTION (FFI)?

All foreign (i.e. non-US) entities that are a bank, a specific insurance company, or a specific investment fund (generally determined based on the client’s NACE industry code).

NO NON-FINANCIAL FOREIGN ENTITY (NFFE)

All remaining entities are considered to be Non-Financial Foreign Entities (NFFEs). A further distinction needs to be made between Passive and Active NFFEs in order to determine the risk they pose with regard to tax evasion.

ACTIVE NFFE

Entities that (mainly) perform manufacturing or non-financial services activities and for which only a minority of total income is passive income.

PASSIVE NFFE

Entities for which the majority of total income is so-called passive income (a.o. interests and dividends and gains from the sale of securities). These entities are potentially incorporated for tax evasion purposes. Examples are patrimonial entities and certain holdings.

CONTROLLED BY U.S. PERSON

6  |  CORPORATE & PUBLIC BANK

Passive NFFEs with US controlling persons have to be reported to the IRS.

Focus on Non-Financial Entities • Whether a Non-Financial Foreign Entity (NFFE) is Active or Passive is determined by calculating 2 financial ratios. An NFFE is Passive if either or both of the following ratios 50% or higher:

Income ratio: Financial Income Financial Income + Operating Income + Extraordinary Income

»» Substantially all of the activities of the entity consist of holding the outstanding stock and/or providing financing and services to one or more subsidiaries, given that the entity is not an investment fund »» The entity is a treasury/coordination center, given that substantially all of its activities consist of providing financing and hedging services to related entities »» The entity is a non-profit entity

(1) Replaced by Operating Income for entities who deposit full annual accounts

Asset ratio: Financial Assets + Investments + Cash at Bank and in Hand Total Assets

• Ratios are only calculated for entities that deposit their annual accounts with the National Bank of Belgium. For other entities their NACE industry code is used to determine the classification. • Exceptions apply based on which the entity can be considered as an Active Non-Financial Entity, regardless of its financial ratios or NACE industry code (non-exhaustive list): »» The entity is stock market listed or is a related entity (subsidiary, parent, or under common control) thereof »» The entity is a public entity (government body, international organization...), or is wholly owned by one or more of the foregoing

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STEP 2: OBTAIN CERTIFICATION FROM SPECIFIC CLIENTS Financial institutions must request a specific certification from clients with the following FATCA classifications:

U.S. ENTITIES

FOREIGN FINANCIAL INSTITUTIONS IN NONPARTNER JURISDICTIONS

PASSIVE NON-FINANCIAL FOREIGN ENTITIES

8  |  CORPORATE & PUBLIC BANK

These entities are likely to be U.S. taxpayers. Therefore they must complete the official IRS W-9 form in which they need to complete taxpayer identification details, including their

In order to certify that they are FATCA-compliant, Foreign Financial Institutions in NonPartner Jurisdictions (i.e. countries that have not signed a FATCA-agreement with the U.S.) must complete the official IRS W-8BEN-E form.

Passive NFFEs need to certify whether any of their Controlling Persons (i.e. individuals that ultimately own more than 25% of the shares of the entity) are U.S. taxpayers by completing the FATCA Self-Certification form (document specific to BNP Paribas Fortis). Note that all Passive NFFEs need to complete this document, regardless of their ties with the United States.

STEP 3: REPORTING INFORMATION ON ACCOUNTS HELD BY U.S. TAXPAYERS Financial institutions are required to report information on the following clients to FOD/SPF Finance on an annual basis, who will in turn provide this information to the U.S. IRS:

CONFIRMED U.S. ENTITIES

PASSIVE NFFES WITH U.S. CONTROLLING PERSONS

CLIENTS THAT DID NOT COMPLETE A FATCA DOCUMENT

Entities who have confirmed they are U.S. taxpayers.

Entities who have confirmed they are a Passive NFFE and that 1 or more of their Controlling Persons are U.S. taxpayers.

Entities who do not complete the FATCA document requested by the financial institution before the defined deadline, regardless of their ties with the United States. (All controlling shareholders and account information of the entity will be reported to the IRS)

In addition to the identification details on the entity and its controlling persons, following information will be reported for each current, savings, term, and securities account held by clients that must be reported:

• Total of gross proceeds from the sale or redemption of assets for which BNP Paribas Fortis acted as the custodian or broker, credited to the account during the calendar year (from 2016 onwards)

• End-of-year account balance (from 2014 onwards) • Total of interests and dividends credited to the account during the calendar year (from 2015 onwards)

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PRACTICAL IMPLICATIONS

• All clients from which BNP Paribas Fortis is legally required to obtain a certification will be contacted personally in the coming months in order to complete the applicable FATCA document. • In the event you believe the FATCA classification assigned to your entity is incorrect, you can certify the correct classification by completing one of the official IRS forms: »» W-9 form if your entity is a U.S. entity »» W-8BEN-E form if your entity is a Foreign Financial Institution, Active Non-Financial Foreign Entity, or Passive Non-Financial Foreign Entity • Clients that must be reported for FATCA will be included in the yearly reporting to FOD/SPF Finance from spring 2015 onwards (on calendar year 2014 data). A report will be provided to these clients detailing the information that was provided to FOD/SPF Finance.

10  |  CORPORATE & PUBLIC BANK

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CORPORATE & PUBLIC BANK, BELGIUM BNP Paribas Fortis SA/NV, Montagne du Parc 3, B-1000 Brussels, RPM/RPR Brussels, VAT BE0403.199.702, Intermediary authorized under number 25.879A by the FSMA

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This brochure was created for informative purposes by BNP Paribas Fortis SA/NV. The information contained in this brochure is subject to change. While BNP Paribas Fortis SA/NV takes great care to ensure that the information in this brochure is correct, it may not be held liable for possible errors or omissions, or the direct or indirect damage that might result from this. Responsible editor: Ann Plaetinck І 1020B_EN PIE0000 - -00B_EN - January November 2014 2012