Abstract
This article assesses potential effects of the Foreign Account Tax Compliance Act (FATCA) from the perspective of exchange-traded funds (ETFs). In some respects these vehicles are in a fortunate position as there is an exception for equity and debt that is regularly traded on established securities markets. However, this exception is only with respect to certain portions of the legislation and does not mean that promoters of such products can stay outside of the regime. First, to prevent withholding on certain payments of investment income from U.S. sources, ETFs must still participate in the regime. Second, promoters are often parts of financial services groups that offer a range of investment products and services alongside ETFs. Any significant difference in treatment between competing products that results in a competitive advantage that cannot be justified on clear policy grounds will be a concern not only for policy makers but also for the investment management industry. After providing a general overview of the regime, this article explores these two themes in more detail. The discussion reflects guidance provided by the FATCA statute itself and the proposed regulations issued by the U.S. Internal Revenue Service on February 8, 2012.
- © 2012 Pageant Media Ltd
Don’t have access? Register today to begin unrestricted access to our database of research.