On July 12, the Treasury Department issued Notice 2013-43, which provides a revised timeline for the Foreign Account Tax Compliance Act (FATCA). The FATCA withholding and reporting requirements will be delayed six months until July 1, 2014. The Treasury decided to postpone the FACTA deadlines largely so that countries may enter into intergovernmental agreements (IGAs) with Treasury. The delay will also provide additional time to foreign financial institutions (FFIs) to implement information technology systems for reporting information.
Notice 2013-43 delays the FATCA start date for withholding six months, from January 1, 2014, to July 1, 2014. The definition of grandfathered obligations is revised to include obligations outstanding on July 1, 2014. Withholding agents will generally be required to implement new account opening procedures by July 1, 2014, or in the case of a participating foreign financial institution (PFFI), by the later of July 1, 2014 or the effective date of its FFI agreement. The Notice modifies the definition of "preexisting obligation" to account for the deadline delays. Treasury intends to include a similar change to "preexisting account" in both model IGAs.
Because the FFI agreement of a PFFI that registers and receives a global intermediary identification numbers (GIIN) from the IRS on or before June 30, 2014 will have an effective date of June 30, 2014, the due diligence deadlines will effectively be pushed back by six months. The requirement in the final regulations that PFFIs file information reports on their U.S. accounts with respect to 2013 and 2014 no later than March 31, 2015 is modified to apply only for 2014 information. Further, information exchanged by IGA partner jurisdictions in 2015 will be required to include only information from 2014.
The opening of the registration website for FFIs to register with the IRS has also been delayed, opening now on August 19, instead of July 15. Unlike the prior arrangement in which FFIs had from July 15 to October 15 to register on the portal, the delay will allow FFIs to create an account, input information, and access their account until December 31, 2013. On or after January 1, 2014, each FFI will be required to finalize its registration by logging into its account on the FATCA website, making any additional changes, and submitting the information as final. The IRS will not issue any GIINs in 2013. The first list of FFIs will be issued on June 2, 2014 and updated monthly thereafter. FFIs must finalize their registration by April 25, 2014 to be included in the June 2014 FFI list. With the extra time provided by the delay, organizations are encouraged to register more entities up front as opposed to postponing the process.
In addition to providing additional time to FFIs for implementing FATCA, the deadline delay will allow the IRS to release the remaining guidance necessary to effectively implement FATCA. The IRS has yet to release FFI agreements; revenue procedures; and final forms and instructions for forms W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting, W-8BEN-E, Certificate of Status of Beneficial Owner for United States Tax Withholding and Reporting (Entities), and W-9, Request for Taxpayer Identification Number and Certification. Without the remaining guidance, FFIs are unable to adequately implement FATCA.
Another update in Notice 2013-43 is the treatment of FFIs operating in jurisdictions that have signed an IGA to implement FATCA. The Treasury website will list jurisdictions with IGAs in effect and the list will include jurisdictions that have signed but have not yet brought into force IGAs. FFIs located in jurisdictions with an IGA in effect are permitted to register on the FATCA registration website as registered deemed-compliant FFIs (which includes all reporting Model 1 FFIs) or PFFI (which includes all reporting Model 2 FFIs). This update is expected to encourage countries to begin the process of entering into IGAs.
Because of the universal impact that FATCA will have, the delay in the deadlines provides the IRS and entities the time to properly plan and execute in anticipation of FATCA. The deadline does not suggest that entities should wait to become FATCA compliant, but rather provides entities with additional time to undergo the time consuming and important internal changes that must be made. Moreover, countries have been provided the opportunity and encouragement to enter into IGAs. For example, the Treasury has indicated a desire to enter into agreements with Latin American jurisdictions. The momentum of FATCA will not be weakened by the deadline delay; all interested parties have instead been given the time to more capably prepare for its commencement.