Announcement 2014-17 provides transitional relief before an Australian IGA comes into effect.
It confirms the FATCA regime for Australian financial institutions is a Model 1 intergovernmental agreement (IGA).
It permits Australian financial institutions to register with the Internal Revenue Service (IRS) and obtain a Global Intermediary Identification Number (GIIN) before the IGA is signed.
What does it mean?
Announcement 2014-17 addresses some of the short-term uncertainty faced by Australian financial institutions in relation to the FATCA regime and IRS registration.
It is a strong reminder that FATCA commences on 1 July 2014 and will apply to all financial institutions in Australia (unless they can rely on a specific exemption).
Transitional relief before the IGA is signed: Australia treated as having the Model 1 IGA in effect
Australia is listed as a jurisdiction that has reached an agreement in substance on the terms of a Model 1 IGA. As a result, Australia is now treated as having the template Model 1 IGA in effect. This treatment will continue until 31 December 2014, by which date the Australian and US governments must have signed the IGA.
The text of Australia’s IGA, which has been agreed to in substance (see our previous alert), will not be published by the IRS or Treasury until the IGA is signed. It is expected that the IGA provisions should not differ substantially from the Model 1 IGA, except in limited circumstances in Annex II (which sets out relevant exemptions).
FATCA registration clarified: Australian financial institutions can now register on the IRS website
Australian foreign financial institutions (FFIs)can now make an appropriate registration on the FATCA website and can certify their status to a withholding agent with certainty.
First FATCA deadline extended: Register by 5 May 2014 to appear on the initial IRS list of FFIs
In order for 30% withholding not to apply, FATCA generally requires withholding agents to obtain an FFI's GIIN for withholdable payments made after 30 June 2014 and to confirm that the GIIN appears on the IRS FFI list.
The IRS intends to publish the first list of FFIs with GIINs on 2 June 2014. To appear on this first list, FFIs now have until 5 May 2014 (previously 25 April 2014) to register on the FATCA registration website.
Although withholding agents will not be required to obtain a GIIN from Australian FFIs for payments before 1 January 2015, Australian FFIs may wish to consider registering early to simplify their FATCA certification processes.
The full text of Announcement 2014-17 is available here.