Notice 2013-43 (http://www.irs.gov/pub/irs-drop/n-13-43.pdf), released on July 12, 2013, announces the Internal Revenue Service's (the "IRS") and the Department of the Treasury's intent to amend final Treasury regulations implementing the U.S. Foreign Account Tax Compliance Act ("FATCA") to (1) extend certain implementation dates for withholding and account due diligence and (2) specifically identify jurisdictions treated as having in force intergovernmental agreements ("IGAs") for the implementation of FATCA, including jurisdictions that have signed IGAs but have not yet brought those IGAs into force.
Taxpayers are permitted to rely on the provisions of Notice 2013-43 until amended regulations are issued.
Extension of FATCA Implementation Dates
The Notice makes the following amendments:
- Withholding will begin on U.S.-source FDAP payments made after June 30, 2014, to foreign financial institutions ("FFIs") or non-financial foreign entities that are not FATCA compliant with respect to obligations that are not grandfathered obligations or treated as exempt from withholding.
- Grandfathered obligations" will now include obligations outstanding on (and not materially modified after) July 1, 2014 (and associated collateral).
- Implementation of new account opening procedures is now required by July 1, 2014 (or for a participating FFI ("PFFI"), the later of July 1, 2014 or the effective date of its FFI agreement). Accordingly, for these purposes, and, as revised by the Notice, the term "preexisting obligation" means any account, instrument or contract maintained, executed, or issued with respect to a:
- withholding agent other than a PFFI or registered deemed-compliant FFI, if outstanding on June 30, 2014,
- PFFI, if outstanding on the effective date of its FFI agreement, and
registered deemed-compliant FFI, if maintained, executed or issued prior to the later of
July 1, 2014, or the date on which the FFI registers as a deemed-compliant FFI and receives
a Global Intermediary Identification Number ("GIIN").T
- The Notice also indicates that a similar change to the definition of the term "preexisting account" in both model IGAs (discussed below) will be made.
- Due diligence on preexisting obligations is postponed six months. This postponement will affect the effective dates of FATCA withholding with respect to such preexisting obligations for withholding agents.
- The obligation to monitor account balance or value of preexisting accounts to determine whether enhanced review is required is deferred to the end of 2015.
- The due date for PFFIs to file their first information reports with respect to U.S. accounts for the 2014 calendar year is delayed to March 31, 2015 (no requirement to file for earlier years).
- Extension of the limited transition rule provided in Notice 2012-20 to apply the foreign-targeted registered obligation rules of §1.871-14(e) to obligations issued in registered form after March 18, 2012 and before July 1, 2014.
Provisions of FATCA Not Extended
- The timetable for withholding on gross proceeds, pass-thru payments and the payment of U.S. source FDAP with respect to offshore obligations by persons not acting in an intermediary capacity is not extended.
- •Annual reporting by PFFIs of the full scope of FATCA information is still required by the beginning of 2017.
Timeline for Registration and Assignment of GIINs is Extended
- August 19, 2013—The FATCA registration website is projected to be accessible to financial institutions to begin the registration process.
- Between August 19, 2013 and December 31, 2013—Registration information submitted will not be treated as a final submission but merely stored on the website.
- Beginning January 1, 2014, financial institutions must finalize registration information by logging into their account, making any necessary changes and submitting the information as final. Information submitted as final to be treated as final.
- After January 1, 2014, GIINs will be issued.
- FFIs that finalize registration by April 25, 2014, will be included on the first IRS FFI List which will be posted by June 2, 2014.
- Prior to January 1, 2015, verification of GIINs is not required with respect to payees that are reporting Model 1 IGA FFIs. Accordingly, Model 1 FFIs may register and obtain GIINs beginning January 1, 2014, but they will have additional time beyond July 1, 2014, to register and obtain GIINs to ensure they are included on the IRS FFI list before January 1, 2015.
- Extension of Certain Expiring Certificates, Documentary Evidence, and Agreements
- For chapter 3 withholding purposes, withholding certificates and documentary evidence that would otherwise expire on December 31, 2013, will expire on June 30, 2014 (unless a change in circumstances occurs that would otherwise render such item incorrect or unreliable).
- Qualified Intermediary, Withholding Trust and Withholding Partnership Agreements otherwise expiring on December 31, 2013, will expire on June 30, 2014.
Treatment of Listed Jurisdictions as having IGAs in effect
- There are presently two model IGA formats. The Model 1 IGA requires FFIs to report to the government of the jurisdiction of the FFI. The Model 2 IGA requires FFIs to report to the IRS. Jurisdictions that have signed IGAs, even if the IGA has not entered into before July 1, 2014, will be treated as jurisdictions that have an IGA in force if appearing on a list to be published at http://www.treasury.gov/resource-center/tax-policy/treaties/Pages/FATCA-Archive.aspx. This list will provide needed certainty to FFIs, especially those in jurisdictions that have entered into or are in the process of entering into Model 1 IGAs with respect to their ability to register on the FATCA website as registered deemed‑complaint FFIs.
Key FATCA Implementation Dates
- The following chart provides changes to key implementation dates for FATCA as a result of Notice 2013-43.
Click here to view table.