FATCA agreement between Belgium and the United States signed

The intergovernmental agreement (IGA) between Belgium and the United States governing reciprocal financial information-sharing and the implementation of FATCA, was signed recently. According to this agreement, Belgian IORP's will not be considered as financial institutions subject to FATCA.

The "Foreign Account Tax Compliance Act" (FATCA) is an American act aiming at preventing US citizens from avoiding tax through foreign financial institutions. To this end, foreign "financial institutions" (in a very broad sense) will have to annually notify the accounts held by American citizens or certain American legal entities to the American Internal Revenue Service (IRD). The first reporting is due in 2015, relating to the data of 2014.

For Belgium, as well as for a lot of other countries, the application of FATCA is determined in an IGA. On the basis of this IGA, Belgian "financial institutions" are bound to report the data as part of FATCA to the Belgian tax authorities, which is in its turn obliged to exchange information with the American IRS. Financial institutions that are not cooperating will be subject to a withholding tax of 30% on certain payments of US source income (such as dividends from American investments).

Because "financial institution" is a very broad notion under FATCA, there was a risk for Belgian pension funds or IORP's to be subject to FATCA. However, the IGA determines that Belgian pension funds that are entitled to benefits under the income tax treaty between Belgium and the United States are exempted from the FATCA obligations. As a rule, this applies for IORP's with Belgian activities only, as well as for pan-European IORP's located in Belgium.

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The Belgian IORP's are exempted from the obligations under FATCA concerning registration and reporting, even if the IORP has participants with American citizenship.