Understanding the Final Regulations of the Foreign Account Tax Compliance Act (FATCA)

April 29, 2013

Audio conference highlights:

On January 17, 2013, the US Department of the Treasury (“Treasury”) and the US Internal Revenue Service (the “IRS”) released final regulations implementing foreign account reporting provisions of the US Hiring Incentives to Restore Employment Act enacted in March 2010. These provisions, which are commonly referred to as “FATCA,” were introduced to facilitate IRS efforts to combat tax evasion by US taxpayers who conceal income by investing in non-US financial accounts or non-US entities

Generally, FATCA requires “foreign financial institutions” (defined very broadly) and certain other non-US entities to identify certain direct or indirect US account holders or owners. Foreign financial institutions additionally will be required to report identified US accounts to the IRS and, in some instances, withhold tax from certain payments made to non-compliant holders. Compliance is enforced through a new 30% withholding tax imposed on certain US source payments and potentially other payments made to non-compliant foreign financial institutions and other non-compliant non-US entities.

Separately, Treasury is pursuing an alternative, intergovernmental approach to FATCA implementation with a number of non-US jurisdictions. Foreign financial institutions that are residents of a jurisdiction that have concluded such an intergovernmental agreement will be deemed compliant with FATCA, if they satisfy the due diligence and reporting obligations of the agreement as implemented by the domestic laws of their home jurisdiction.

This presentation describes the types of payments that give rise to FATCA withholding and the types of non-US entities to which FATCA withholding may apply. Our speaker discusses, in detail, the more stringent requirements imposed on foreign financial institutions as well as due dliligence, reporting and withholding timelines and centralized compliance options.

This audio conference covers:

  • When payments are subject to FATCA withholding
  • Which non-US entities are treated as foreign financial institutions for FATCA purposes
  • What exactly a foreign financial institution or other non-US entity must do to avoid the FATCA withholding tax and whether any centralized options exist for affiliated or commonly managed entities
  • Which US accounts are exempt from FATCA reporting
  • Which non-US entities are exempt from or deemed compliant with FATCA
  • How the final FATCA regulations will overlap with any intergovernmental agreements

To download a recording of this broadcast, please click here. (Please note there is a fee to download.)