Recent Enactments Affecting Offshore Funds Attack Offshore Tax Abuses, Raise Taxes on Investment Income and Gains

April 06, 2010
The recently enacted Hiring Incentives to Restore Employment Act includes as a revenue offset many of the provisions of the Foreign Account Tax Compliance Act (“FATCA”) first proposed in October 2009. The enacted FATCA provisions impose new withholding taxes on payments to foreign entities and on dividend equivalent payments, eliminate exemptions related to foreign bearer bonds, and introduce heightened reporting requirements for individuals with offshore assets. This update clarifies these wide-reaching provisions and how they will affect foreign financial institutions, foreign hedge funds, private equity funds, and their U.S. and non-U.S. investors.