Not for the first time, the global response to FATCA seems to have taken the US Treasury and Internal Revenue Service (IRS) by surprise.
Given the "overwhelming" international interest in signing up to IGAs to implement FATCA, and the prospect of a 1 January 2014 FATCA 'D-day', a further raft of extensions to implementation deadlines was announced last Friday. They include:
- commencement of withholding on US source income payments to non-compliant FFIs pushed back to 1 July 2014
- US-source payments in respect of loans and other obligations advanced or committed prior to 1 July 2014 will be 'grandfathered'
- 'new' financial accounts are to be those opened on or after 1 July 2014. More burdensome due diligence obligations are imposed in respect of such accounts, and procedures for opening new accounts must be in place by 1 July 2014
- a 6-month extension to the deadline for completing a review of 'pre-existing' financial accounts
- FFIs will need to register with the IRS by 25 April 2014 to be certain to be included on the first list of compliant institutions, to be published by 2 June 2014
What about the IGAs?
Crucially, for UK FFIs and those in other IGA jurisdictions, the latest announcement confirms that the new deadlines will be incorporated into the IGAs.
The prospect of a network of IGAs has calmed much of the early FATCA outrage. The further relaxation of deadlines is welcome, as is the statement that the IRS will regard a jurisdiction as having an IGA in effect if that jurisdiction has signed (but not yet implemented) an IGA. As over 80 jurisdictions are currently discussing possible IGAs with the US, it is certain that the number of signed IGAs will increase from the current total of 9.
This latest announcement will go some way to addressing concerns that due to the popularity of the IGA approach, FATCA could be rolled-out before some jurisdictions had been able to sign up to an IGA. It is to be hoped that a large number of IGAs can now be signed before FATCA 'goes live'.
The question is, have we seen the last movement in the FATCA deadlines? A lot rests upon how the thorny issue of so-called "foreign passthru payments", currently parked, is resolved.
The Treasury/IRS statement can be accessed here.