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Originally Posted by signupdamnit
Please post some more details if you don't mind. That seems unrealistic to me. There is too much money in the US for it to be ignored.
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Did you read the post above that one? I could go into PAGES of detail, but it's not hard to find out for yourself. Already the Japanese bank association is planning to pull out of any involvement with anything US related, and EU banks will start to follow.
Here is some cut and paste on another aspect of FACTA that I don't deal with as much:
FATCA will impact any U.S. borrower entering into a syndicated loan after Jan. 1, 2013 (or an earlier loan which is materially amended after that date). The loan will then become subject to 30% withholding tax on interest after Jan. 1 2014 and, more seriously still, 30% witholding tax on the principal after Jan. 1, 2015. The rules even apply to non-U.S. borrowers if they are classed as FFIs, so that interest and principal paid by such borrowers would become subject to ?passthru withholding tax? from 2017. This means that participating FFIs agree to withhold U.S. tax from payments to other non-participating FFIs ? even on arrangements that have no connection with the U.S.
The definition of an FFI is wide, encompassing banks, insurance companies, and most funds and capital market issuers, as well as group treasury companies who provide funding to non-group entities (e.g. trade finance). Subsequently, almost everyone will potentially be affected by FATCA. Further, the grandfathering date after which loans and debt securities become subject to FATCA is Jan. 1 2013, so there is very little time to digest the proposed regulations, and resolve the issues thrown up.
For CLOs, FATCA could be ?catastrophic,?? according to the LSTA?s Meredith Coffey. ?Existing CLOs would be required to provide information to the IRS on their U.S. accounts. However, because their notes and equity trade in the secondary market, the CLOs often don?t know who their U.S. accounts are. But if the CLO doesn?t provide the information to the IRS, it would be subject to a 30% withholding tax; this could be a ?tax event? for a CLO and could result in the liquidation of the CLO.?
Coffey goes on to say that FATCA is also problematic for the entire U.S. loan market, as there will be considerable reporting required any time a foreign lender is part of a U.S. bank group.
Key issues
On the surface, the simple solution would be to ensure all FFIs sign up to FATCA, but there is concern that FATCA?s reporting requirements would conflict with local data protection and other laws. Many European banks fear that EU data protection laws and other local law requirements prohibit them from signing up to FATCA, according to Clifford Chance.
Another key issue is how to approach FATCA risk ? namely the question of who assumes the risk that a lender is not an FFI, and is subsequently accountable for the 30% withholding tax.
In its March 23 newsletter, the LSTA highlights a recent CLE seminar, ?FATCA ? Are You Within its Reach??, presented by Stephen Fiamma of Allen & Overy and David Moldenhauer of Clifford Chance, in which the panelists discussed the issue of risk.
According to the newsletter, ?The panelists observed that the U.S. market has allocated FATCA risk entirely to lenders. Meanwhile Europe struggles to determine how to approach FATCA risk, particularly given that a draft FFI Agreement and the scope and content of potential intergovernmental agreements are not yet available.?
Under the current LMA documents, withholding by an agent is not envisaged, which could lead to disputes between borrowers, lenders and agent if a participating agent withholds U.S. tax from a payment to a non-participating lender.
Another issue concerns the point that while loans issued prior to January 2013 will be exempt from FATCA, any material amendments to those loans, including amendment/extension exercises, after January 2013 will mean they become subject to FATCA, potentially forcing U.S. borrowers to repay those loans by 2014 and FFI obligors by 2017.
?Whilst the aim of FATCA is laudable, the way it uses extra-territorial withholding taxes to coerce institutions to comply is disproportionate, and is creating uncertainty in the loan markets at a time when liquidity is at a premium,? according to Dan Neidle, partner at Clifford Chance. Clifford Chance?s most recent update note on FATCA can be found on its website.