Treasury Delays Implementation of Certain Aspects of FATCA for Six Months

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On July 12, 2013, the Internal Revenue Service (the “IRS”) released an advance copy of Notice 2013-43 (the “Notice”), which extends the timeline for the implementation of withholding, registration and due diligence obligations under the Foreign Account Tax Compliance Act (“FATCA”). The US Department of the Treasury (the “Treasury”) is currently engaged in discussions with more than 80 countries regarding the implementation of intergovernmental agreements (such an agreement, an “IGA”), and the purpose of the Notice is to allow sufficient time for the implementation of those IGAs. The principal issues addressed by the Notice are summarized below.

Revision to Grandfathering Date and Withholding Commencement Date -

The Notice announces a six-month delay for the effective date of certain withholding requirements under FATCA and a six-month extension of the cut-off date for “grandfathered” obligations (or obligations that are not subject to FATCA withholding). Withholding on certain US source payments (including, but not limited to, payments of US source dividends and interest) under FATCA will begin on July 1, 2014, and the definition of a grandfathered obligation is expanded to include obligations issued on or before June 30, 2014. The Notice does not delay the January 1, 2017 effective date for withholding on payments of gross proceeds or “passthru” payments.

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