IRS announces six-month delay in FATCA implementation

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On Friday, the US Treasury Department and the Internal Revenue Service announced a six-month extension to the start of the FATCA withholding and account due diligence requirements. 

 

The delay to July 1, 2014 will provide foreign financial institutions (FFIs) with the time necessary to comply with FATCA and allow more time for the US Treasury Department to complete intergovernmental agreements (IGAs) with foreign countries.

 

In the coming days we will send you a more in-depth look at the IRS's announcement, published as Notice 2013-43.

 

The headlines under Notice 2013-43 are: 

  • FATCA withholding on US Source FDAP commences July 1, 2014.
  • New account opening procedures apply to withholding agents beginning July 1, 2014.
  • New account opening procedures for a Participating FFI (PFFI) commence by the later of July 1, 2014 or the effective date of its FFI Agreement.
  •  “Preexisting Obligation” is modified:
    • With respect to withholding agents - any account, instrument, or contract (“Account”) outstanding on June 30, 2014.
    • With respect to PFFIs - any Account outstanding on the FFI Agreement effective date.
    • The US Treasury Department will include a similar change to the definition of the term “Preexisting Account” in both Model IGAs.
  • Grandfathered obligations are extended to obligations outstanding on July 1, 2014.
  • Due diligence on preexisting obligations - PFFIs that receive a GIIN from the IRS on or before June 30, 2014 will effectively have a six-month postponement of the deadlines for completing due diligence. A similar rule will apply for IGAs in Annex I.
  • Due date for first PFFI Report of US Accounts - March 15, 2015 for 2014 accounts identified by December 31, 2014. A similar rule will apply to IGAs as well. There will be no reporting of US Accounts for the 2013 calendar year.
  • Timeline for registration – The IRS Portal will now open on August 19, 2013 (rather than by July 15, 2013). Other key dates for registration will be extended six months. For the period from the opening of the FATCA registration through December 31, 2014, any information entered into the system will not be regarded as final but can be modified. Thus, a financial institution can use the remainder of 2013 to become familiar with the registration process and refine its registration information prior to January 1, 2014. GIINs will not be issued in 2013, but are expected to be issued in 2014. The first electronic IRS FFI List will now be published June 2, 2014; to get on this list, the FFI must finalize its registration by April 25, 2014. Reporting Model 1 FFIs will have additional time beyond July 1, 2014 to register and obtain a GIIN in order to ensure that they are included on the IRS FFI List before January 1, 2015.
  • IGA Jurisdictions - A jurisdiction will be treated as having in effect an IGA if it is listed on the US Treasury Department website as a jurisdiction that is treated as having an IGA in effect. In general, the US Treasury Department intends to include on this list jurisdictions that have signed but have not yet brought into force an IGA. In a separate new release, the US Treasury Department announced that it is engaged in IGA-related conversations with more than 80 jurisdictions, in addition to the 9 jurisdictions that have already signed IGAs.