FATCA generally applies to two defined payment types, namely:
- Withholdable payments.
- Pass-through payments.
Withholdable payments under FATCA are payments of interest, dividends, rents, and certain other specified items of income from US sources.
Pass-through payments under FATCA are certain payments that would originate from a debtor payment, which passes through a foreign financial institution* (FFI) to a non-compliant account holder* at such FFI that are "attributable to" withholdable payments that would be subject to withholding under FATCA.
An example of a pass-through payment is where a dividend is paid by a US company to the account holder* via a FFI.
In addition, an FFI must withhold 30% on any pass-through payment it makes to a non-compliant account holder, as well as on payments it makes to another FFI, unless that FFI meets certain requirements.
*For any defined terms please see the Table of termsand definitions.
