The Corporate Transparency Act
The Corporate Transparency Act came into force on 1 January 2022 in the US.
This law was created with the aim of fighting financial crime, the phenomenon of shell companies, anonymous companies or those involved in terrorist financing, money laundering, fraud, tax evasion, etc.
The CTA requires all entities registered to do business (managing assets or carrying on activities) in the US to report beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN).
Who is involved.
Anyone holding assets in the U.S. and assets anywhere in the world through U.S. companies or trusts that are based in the U.S. even if they were fiscally resident in Italy.
For example, anyone who opens a new bank account with US financial institutions, banks, mutual funds, brokers, on behalf of a legal entity (Corporation, LLC or other entity formed by filing a public document, a partnership, and any business entity formed in the US or other countries).
There are some exclusions: sole proprietorships, non-profit organizations, unincorporated associations and individuals opening accounts in their own name.
This law will give rise to many controls that will therefore affect both large companies and individual investors or real estate companies setting up new entities for each individual project, but also smaller, family-run businesses. The information of the beneficial owner will have to be disclosed for each entity set up.
Who is considered a beneficial owner.
1) Any individual who holds, directly or indirectly, 25% of the legal entity's interest.
2) Any individual who has significant responsibility for the management of the legal entity (e.g., a Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, Managing Partner, Partner, President, Vice President or Treasurer).
What data should be disclosed.
- name and date of birth
- address of residence
- social security number or Identity Document/Passport number (in case of non-US persons) for each individual beneficial owner.
Every new entity registered in the US must provide this information within one year of incorporation and the reported data must be updated each year.
This information is only disclosed by FinCEN to government and financial institutions for law enforcement or national security purposes.
Non-disclosure or incomplete disclosure of data, as well as the reporting of false information, is a violation of the CTA which carries civil and criminal penalties up to imprisonment.
Unauthorized disclosure of this information is also a violation with civil and criminal penalties up to and including imprisonment.
FinCEN may also disclose this information to authorities in other countries according to international information exchange agreements.
For example, the Internal Revenue Service in Italy may request information about Italian individuals to check whether they are listed in the database as beneficial owners of U.S. companies.
Consequently, anyone in Italy who holds shares in companies in the USA must ensure that the RW form of the individual tax income declaration is filled out. Failure to do so, or incorrect data, could result in an assessment by the Italian Revenue Agency.
For further information on this matter or to check your position and verify whether or not you are obliged to communicate this data, please contact our offices.