Those of us who regularly review debt facilities have probably noticed that the prospective (earliest) application date for FATCA withholding on "gross proceeds” from sales or other dispositions and "foreign passthru payments" passed last week. The UK's Loan Market Association were onto it and delivered the early Christmas present of amended wording to its suite of facility documentation. Don't worry if you or your clients have just signed a pre-change version, however, as the old definition was self-correcting, referring to 1 January 2019 or such other date as may apply due to a change in FATCA.
On 13 December 2018 the US Treasury Department and the IRS published proposed Regulations which do change FATCA. There are a number of detailed tweaks but the key changes relevant to UK lawyers are:
- Deleting altogether the proposed withholding on "gross proceeds"; and
- Extending the earliest application date for withholding on "foreign passthru payments" to the date two years following the publication of final regulations defining the term "foreign passthru payment".
This leaves FATCA withholding currently applying, in the absence of a "Model 1" Inter-governmental Agreement (IGA), only to so-called US-source "FDAP income" – fixed or determinable annual or periodical gains, profits and income such as interest, dividends, rents, salaries and annuities. The spectre of withholding on "foreign passthru payments" (non-US source payments derived from US sources) is pushed back to at least 2021.