The US Treasury and the Internal Revenue Service (IRS) have announced that calendar years 2014 and 2015 will be regarded as a transition period for the purposes of IRS enforcement and administration with respect to the implementation of the Foreign Account Tax Compliance Act (FATCA). The same transitional time period will apply to the enforcement and administration of certain modified rules relating to reporting and withholding on payments made to non-US and US persons under Chapters 3 and 61 and Section 3406 of the Internal Revenue Code that were revised by coordinating regulations issued on 20 February 2014. This targeted "relief" means that the IRS will take into account the extent to which withholding agents, Foreign Financial Institutions (FFIs) and other entities, are making a good faith effort to comply with FATCA and the modifications to existing information reporting and withholding obligations, until calendar year 2016. A series of amendments will also be made to Chapters 3 and 4 of the Internal Revenue Code to reflect the transition period and incorporate additional guidance (based on stakeholder comments and input) into the Code. The transition period and other amendments are intended to facilitate a smooth and orderly transition for withholding agents and FFIs to comply with FATCA's requirements, allow extra time for more jurisdictions to sign Intergovernmental Agreements applying FATCA, and make the official transition to FATCA in 2015/16 more comprehensive and with fewer penalties. While the relief has been broadly welcomed, it is designed to be limited in scope and does not represent a delay to the start of the FATCA regime. Accordingly, many of FACTA's provisions are still scheduled to take effect on 1 July 2014, and affected organisations are encouraged to achieve FATCA compliance as soon as possible.

Useful links

US Treasury Notice 2014-33