On 12 July 2013, the IRS issued Notice 2013-43 (the notice) that extends the date on which Foreign Account Tax Compliance Act (FATCA) withholding is to begin to 1 July 2014.
The notice also extends the deadline for taxpayers to conduct due diligence, extends the period in which obligations may be treated as grandfathered, and extends the time to establish new account opening procedures. The final FATCA regulations will be amended to incorporate the changes contained in the notice but taxpayers may rely on the notice until the regulations are amended. Significantly, a jurisdiction that has signed an Inter-Governmental Agreement (IGA) but has not yet brought such agreement into force will generally be treated by the Treasury as having an IGA in effect. This will allow foreign financial institutions (FFIs) resident in jurisdictions such as Ireland, Denmark or Germany that have signed but have not yet implemented an IGA to rely on the IGA provisions in developing their FATCA compliance strategy.
In addition, the online FATCA registration portal will not open by 15 July 2013, but will instead open on 19 August 2013. From that date until the end of the year, FFIs will be able to register for FATCA purposes and enter information into the system, however, any information entered prior to 31 December 2013 will not be marked as final. As of 1 January 2014, FFIs will be able to finalise their submissions. Thus, FFIs have from 19 August until the end of 2013 to familiarise themselves with the online portal without actually having to submit the information as final. FFIs will have to complete their registrations by 25 April 2014, in order to be included on the IRS’s first electronic FFI list to be published on 2 June 2014. For payments made prior to 1 January 2015, verification of a payee’s Global Intermediary Identification Number (GIIN) is not required for payments made to FFIs that are reporting under a “Model 1” IGA.
Other key provisions of the notice are as follows:
- First date of withholding is 1 July 2014 (instead of 1 January 2014).
- Grandfathered Obligations determined as of 1 July 2014 (instead of 1 January 2014).
- New account opening procedures for withholding agents required by 1 July 2014.
- New account opening procedures for participating FFIs required by the later of 1 July 2014, or the effective date of the FFI agreement (e.g. where an FFI enters into an agreement after 1 July 2014).
- Pre-existing obligations are defined as any obligations in place as of 30 June 2014.
- Deadline to conduct due diligence on pre-existing obligations is postponed six months.
- Participating FFIs will still be required to report on their US accounts by 31 March 2015. However, reporting will be required only with respect to the 2014 year and not 2013.
- The deadline for withholding on gross proceeds, pass-thru payments is not affected by the notice.
- Withholding certificates (e.g. W-8BENs) set to expire on 31 December 2013, will expire on 30 June 2014.
The notice provides welcome relief as it will give organisations more time to get ready for FATCA. Organisations should consider how the new revised implementation deadline impacts their FATCA assessment and implementation programme and should continue to develop a robust FATCA compliance strategy.