Revised Timeline for Implementing FATCA

Sections 1471 through 1474 of the U.S. Internal Revenue Code (“FATCA”) generally impose a 30% withholding tax on certain payments to a foreign financial institution (“FFI”) unless the FFI has entered into an agreement with the U.S. Internal Revenue Service (“IRS”) in which it agrees to comply with certain reporting, due diligence and withholding requirements with respect to its U.S. accounts.1 Alternatively, an FFI resident in a jurisdiction that has signed an intergovernmental agreement with Treasury to implement FATCA (“IGA”) may be deemed compliant if it complies with the reporting and due diligence requirements of the IGA. On July 12, 2013, the U.S. Department of the Treasury (“Treasury”) and the IRS issued Notice 2013-43 providing for (1) revised timelines for the implementation of FATCA and (2) additional guidance regarding the treatment of financial institutions located in jurisdictions that have signed IGAs but have not yet brought them into force. 

Most notably, Notice 2013-43 makes the following changes:

  • Postpones the first date FATCA withholding will begin (and the relevant date for FATCA grandfathering) from December 31, 2013, until July 1, 2014, but does NOT postpone other withholding dates (for example, for gross proceeds or pass-through payments);
  • Postpones implementation of new account opening procedures. As a result, the definitions of the terms “preexisting obligation” and “preexisting account” (as used in the IGAs) will be modified to include any account outstanding on June 30, 2014;
  • Postpones by six months the deadlines for completing due diligence on preexisting obligations;
  • No longer requires FFIs to report on their U.S. accounts with respect to the 2013 calendar year;
  • Postpones the opening of the FATCA registration portal until August 19, 2013, and extends other key registration dates by six months. Registration generally will be required by April 25, 2014, for an FFI to be included on the first IRS FFI list to be published by June 2, 2014. Reporting Model 1 FFIs will have beyond July 1, 2014 to register and obtain GIINs, provided that they appear on the IRS list before 2015; 
  • Automatically extends all qualified intermediary, withholding foreign partnership, and withholding foreign trust agreements that would expire on December 31, 2013, until June 30, 2014; and
  • Permits FFIs resident in jurisdictions that are treated as having an IGA in effect to register on the FATCA registration portal as a registered deemed-compliant FFI (which would include all reporting Model 1 FFIs) or participating FFI (which would include all reporting Model 2 FFIs). For this purpose, a jurisdiction will be treated as having an IGA in effect if it is listed on the Treasury website as a jurisdiction that is treated as having in effect an IGA, regardless of whether that jurisdiction has brought that IGA into force.

Taxpayers may rely on Notice 2013-43 until the current regulations are amended to reflect these changes.

Footnotes

1 For a more in-depth review of FATCA, please refer to "Significant Changes Made in Final FATCA Regulations," DechertOnPoint, February 28, 2013

 

Topics:  Bank Accounts, Banks, FATCA, FFI, IGAs, Internal Revenue Code, IRS, U.S. Treasury

Published In: Finance & Banking Updates, International Trade Updates, Tax Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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