Tuesday, 5 January 2016

FATCA: Understanding the concept of a ‘United States owned foreign entity’

By Stanley Epstein (Principal Associate - Citadel Advantage)

An important FATCA concepts relates to understanding what is meant by a “United States owned foreign entity”. The answer in short order is any non-financial foreign entity (NFFE) with one or more substantial United States owner or owners (see “Six FATCA Concepts You Need to Know”).  

Of course this raises the immediate question as to how is a ‘substantial’ owner defined? Most people, without bothering to delve further make the almost automatic assumption that ‘substantial’ is 40%. How this figure is arrived at, I don’t know. This assumption is, of course, wrong.

The reality is that ‘substantial’ is defined and that definition come out as being ‘a specified United States person who owns more than 10% of the stock of a corporation or its capital or profits in the case of a partnership.’

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