New withholding tax expected to apply from 1 January 2013
Consultation period ended 1 November 2010
The USA has introduced new laws to target offshore tax evasion by US citizens, known as the Foreign Account Tax Compliance Act ("FATCA") provisions. These provisions introduce a withholding tax of 30% on payments such as dividends from US companies to foreign entities from 1 January 2013, unless the entity complies with onerous reporting requirements. This will affect some UK investors including, potentially, pension schemes.
An exemption from the FATCA provisions has been suggested for foreign retirement plans; however the current drafting of the exemption would in fact exclude many UK pension schemes, particularly those sponsored by multinational companies. Hogan Lovells has submitted a comment to the Internal Revenue Service and US Treasury, proposing a revised exemption.