CONTINUEThis site uses cookies. By continuing to browse this site you are agreeing to our use of cookies. Find out more.
  1. Front Page
  2. News By Topic
  3. Advisers Emphasize FATCA Has Not Been Delayed

Advisers Emphasize FATCA Has Not Been Delayed

by Mike Godfrey,, Washington

22 May 2014

Compliance Systems (Convey) and Baker & McKenzie (B&M) have said that the May 2 Notice (2014-33) from the United States Treasury Department should be regarded as facilitating implementation of the Foreign Account Tax Compliance Act (FATCA) by foreign financial institutions (FFIs) over a transition period, and not as a delay to its effective dates.

FATCA, enacted by the US Congress in 2010, is intended to ensure that the US obtains information on accounts held at FFIs by US persons. Failure by an FFI to disclose information on their US clients will result in a requirement to withhold 30 percent tax on payments of US-sourced income.

It is still intended that FATCA will go into operation on July 1 this year, but, with regard to its reporting, due diligence, and withholding provisions, and so as to "facilitate an orderly transition," the Internal Revenue Service (IRS) is to refrain from rigorously enforcing many of its requirements in calendar years 2014 and 2015, as long as FFIs are making a good-faith effort to achieve compliance.

With respect to this transition period, the IRS confirmed in the Notice that it "will take into account the extent to which a participating or deemed-compliant FFI, ... or [a] withholding agent, has made good faith efforts to comply with the requirements" of the FATCA regulations.

For example, it added, "the IRS will take into account whether a withholding agent has made reasonable efforts during the transition period to modify its account opening practices and procedures to document the status of payees," and the IRS "will consider the good faith efforts of a participating FFI, registered deemed-compliant FFI, or limited FFI to identify and facilitate the registration of each other member of its expanded affiliated group, as required for purposes of satisfying the expanded affiliated group requirement."

However, it was also noted that "an entity that has not made good faith efforts to comply with the new requirements will not be given any relief from IRS enforcement during the transition period. Further, the IRS will not regard calendar years 2014 and 2015 as a transition period with respect to ... its enforcement regarding a withholding agent's determinations of the character and source of payments for withholding and reporting purposes."

Commenting on the Notice's reception, Jeff Cronin, Convey's vice president of product strategy, said: "Many financial institutions and other FATCA-impacted organizations are under the impression that FATCA is delayed for another year. However, this is not the case. FATCA reporting obligations are still in place for this year and penalties could be assessed for organizations that are unable to demonstrate positive progress on their FATCA reporting obligations."

"[FFIs] should use this period of transitional relief to continue to implement a FATCA solution, such as preparing internal operations and establishing a process to meet the new reporting requirements," he said.

B&M has also stressed that "calendar years 2014 and 2015 are a transition period for IRS enforcement and administration of FATCA's due diligence, reporting, and withholding provisions. In order to benefit from the transition period, an FFI will need to make good faith efforts to comply with FATCA. An FFI that fails to make good faith efforts to comply is not eligible for any transition period relief."

It concluded that the transition period "does not extend or delay FATCA implementation or effective dates. FATCA withholding still begins July 1, 2014, on withholdable payments to FFIs. The transition period does not affect due diligence deadlines and reporting deadlines for FFIs."

TAGS: compliance | Foreign Account Tax Compliance Act (FATCA) | tax | tax compliance | FATCA | law | banking | insurance | enforcement | legislation | withholding tax | United States | regulation | penalties | Compliance | Tax

To see today's news, click here.


Tax-News Reviews

Cyprus Review

A review and forecast of Cyprus's international business, legal and investment climate.

Visit Cyprus Review »

Malta Review

A review and forecast of Malta's international business, legal and investment climate.

Visit Malta Review »

Jersey Review

A review and forecast of Jersey's international business, legal and investment climate.

Visit Jersey Review »

Budget Review

A review of the latest budget news and government financial statements from around the world.

Visit Budget Review »

Stay Updated

Please enter your email address to join the mailing list. View previous newsletters.

By subscribing to our newsletter service, you agree to our Terms and Conditions and Privacy Policy.

To manage your mailing list preferences, please click here »