On July 12, 2013 the Internal Revenue Service ("IRS") released a copy of Notice 2013-43 (the "Notice") which revises timelines for the implementation of the withholding regime commonly referred to as the Foreign Account Tax Compliance Act ("FATCA") and provides additional guidance concerning financial institutions located in countries that have signed an intergovernmental agreement ("IGA") with the United States to implement FATCA.
In general, FATCA imposes a 30% withholding tax on certain U.S. source and non-U.S. source payments made to certain foreign payees. The Notice provides in part the following extensions:
- The Treasury and the IRS intend to amend the final FATCA regulations to postpone for six months the start of FATCA withholding. Thus, withholding agents generally will be required to begin withholding on withholdable payments made after June 30, 2014 to noncompliant foreign financial institutions ("FFIs") or non-financial foreign entities ("NFFEs"). Certain other timelines, including timelines for withholding on gross proceeds and passthru payments (currently set to begin January 1, 2017), will not be affected by the Notice.
- The exception to FATCA withholding for grandfathered obligations outstanding on January 1, 2014 will be extended to payments made under such agreements outstanding on July 1, 2014 and not substantially modified after such date.
- Withholding agents generally will be required to implement new account opening procedures by July 1, 2014, or, in the case of a participating FFI ("PFFI"), by the later of July 1, 2014 or the effective date of its FFI agreement.
- The deadlines for completing due diligence on preexisting obligations will be postponed by six months.
- PFFIs will no longer be required to file information reports on their U.S. accounts for the 2013 calendar year. However, PFFIs will still be required to file their first information reports on their U.S. accounts for the 2014 calendar year no later than March 31, 2015.
- On August 19, 2013, the FATCA registration website will be open to accept online registrations. Any information entered into the system will not be considered final until January 1, 2014; thus, each financial institution must log onto its account and finalize its registration on or after January 1, 2014.
- No global intermediary identification numbers ("GIINs") will be issued in 2013; GIINs will be issued as registrations are finalized in 2014.
- The IRS will electronically post the first IRS FFI List by June 2, 2014 and will update the list on a monthly basis thereafter. To be included in the first IRS FFI List, FFIs must finalize their registration by April 25, 2014.
- A jurisdiction that has signed but has not yet brought into force an IGA will be listed on the Treasury website as a jurisdiction that is treated as having an IGA in effect. An FFI resident in a jurisdiction that is treated as having an IGA in effect will be permitted to register on the FATCA registration website as a registered deemed-compliant FFI or PFFI depending on the IGA model of its jurisdiction. As of this date, IGAs have been entered into with Denmark, Germany, Ireland, Japan, Mexico, Norway, Spain, Switzerland, and the United Kingdom.
FFIs and NFFEs are urged to consider the impact of FATCA in their particular situations as soon as possible.