What is FATCA and what happens if you don’t provide this information to PayPal requests?

FATCA is  Foreign Account Tax Compliance Act (FATCA) which is a 2010 United States federal law requiring all non-U.S. foreign financial institutions (FFIs) to search their records for customers with indicia of U.S.-person status, being indications in records of a U.S. place of birth, prior residency, or similar, and to report the assets and identities of such persons to the U.S. Department of the Treasury.  FATCA also requires such persons to self-report their non-U.S. financial assets annually to the Internal Revenue Service (IRS) on form 8938, which is in addition to the older and further redundant requirement to self-report them annually to the Financial Crimes Enforcement Network (FinCEN) on form 114 (also known as ‘FBAR’). Like U.S. income tax law, FATCA applies to U.S. residents and also to U.S. citizens and green card holders residing in other countries.

FATCA and PayPal

If you are a new PayPal account holder, you will be required to complete the certification requested by PayPal to comply with FATCA within 90 days of opening your account. If you don’t complete it within 90 days, you will no longer be able to send funds from or receive funds into your account.

If you are an existing account holder and you are required to provide additional documentation to ensure your status (as a U.S. person or a non-U.S. person) is properly documented for FATCA purposes, then you will be required to provide the requested information within 30 days from the date we request it or your account will be limited on day 30. The day 30 limitation will prevent you from sending funds from the account or closing the account.

If you don’t provide the required information within 45 days from the date Paypal request it, your account will be further restricted on day 45. This day 45 restriction will prevent you from sending funds from, or receiving funds into your account or removing bank or card information or closing your account.

In each case the restriction will apply until the proper documents are received by PayPal.

In case you didn’t provide FATCA information to Paypal

Note that even if your account is restricted you’ll be able to log in and access the FATCA information. From your account you can start the certification process by answering a few questions or providing the applicable forms. The certification process is complete when you have provided all requested information and reviewed the certification webpage also provided your electronic signature or written signature

Once you’ve completed this process your account should no longer be subject to the restrictions applied as a result of the FATCA reporting requirements. Any other limitations or restrictions on your account will still apply.

Who is impacted by FATCA?

FATCA impacts holders of accounts that are outside the United States, and it requires PayPal to collect tax documents or certifications from account holders stating whether or not they are U.S. persons. This includes, but is not limited to, business entities, and some individuals that open accounts outside the United States.

Pursuant to FATCA, PayPal also reviews existing account holder records to ensure that the account holder’s status (as a U.S. Person or a non-U.S. Person) is properly documented for FATCA purposes.  In some cases, as a result of this review PayPal may request additional documentation from the account holder.

Situations where additional documentation may be required include:

• If data previously collected about an account holder does not match the information provided in an account holder’s tax documentation / self-certification
• If an account holder claims they are a non-US person but PayPal finds that US identifiers exist in the customer’s information.

How to provide FATCA information to Paypal?

Here’s how to provide PayPal with your FATCA information.

• Log in to your PayPal account.
• Click on the notifications icon.
• Click on the FATCA notification.  
• Follow the instructions provided.

You should read and review the certification or form before signing it with either your electronic signature or written signature. False statements may lead to penalties under applicable law.  If you have any questions or concerns regarding the form, it may be beneficial to engage tax counsel.