Closing the distance
FATCA, the new US tax reporting and withholding regime for non-US accounts, will soon become a reality. Foreign Financial Institutions (FFIs) must register by 25 April 2014 to appear on the FATCA compliance list and prevent the possibility of withholding on income derived from US assets.
Firms need to take steps to ensure they are ready for FATCA compliance. In this section we bring you the latest insights on FATCA from Deloitte, including summaries of key rules outlining what you need to do and by when.
The Foreign Account Tax Compliance Act (FATCA) is the US government’s initiative to ensure transparency in relation to offshore accounts held by US persons. FATCA imposes a 30% withholding tax on US source passive income, such as interest, dividends, rent and royalties, and also on gross proceeds from the disposition of assets which give rise to such passive income. This withholding will apply from 1 July 2014 unless foreign financial institutions (FFIs), including non-US funds, enter into an agreement with the IRS and agree to annually report details of all US investors to the IRS and withhold tax on any “passthru” payments made to investors.
Visit the Deloitte FATCA Resource Library
IRS delays FATCA registration
In Notice 2013-43 the IRS pushed back the FFI registration portal opening and extended most of the FATCA deadlines established by the final Regulations. Generally, all prior deadlines related to the FFI agreement effective date, registration and withholding have been pushed back by 6 months.
On or after 1 January 2014, FFIs will be able to formally register and must complete their registration by April 25, 2014 to appear on the first IRS FFI list to be posted on June 2, 2014.
Read our briefing for an updated timeline summary
Deloitte has compiled a detailed series of FAQs on FATCA, addressing the key aspects you need to know as you prepare for FATCA compliance and registration.
The briefing covers:
- FFI entities
- FFI agreements
- Preparing for FATCA
- US indicia
- Account holder classifications
- Payments subject to FATCA
FATCA in-depth analysis
Deloitte has published an-depth analysis of FATCA, providing a complete overview of the 544 pages that make up the preamble and final Regulations for FATCA. The analysis addresses the following topics:
- Overview and key considerations
- Withholdable payments under FATCA
- Entity classification
- US withholding agent requirements
- Foreign financial institution requirements
- Administrative considerations
Ireland FATCA agreement and guidance
The IRS and US Treasury have developed Model Intergovernmental Agreements which enable financial institutions to report directly to their local tax authorities rather than signing an agreement directly with the IRS.
Ireland was the fourth country to sign an Intergovernmental Agreement (IGA) with the United States. The Ireland-US agreement is substantially similar to the United Kingdom agreement including reciprocal reporting obligations for the United States.
Draft Financial Accounts Reporting Regulations and supporting draft Guidance Notes on the Implementation of FATCA in Ireland have been published by Irish Revenue and it is expected that these documents will be finalised soon, providing the framework for FATCA compliance in Ireland.
Key features of the FATCA IGA are:
- Registration rather than entering into a full FFI agreement
- Development of a common reporting and exchange of information model
- No closing of or withholding on recalcitrant accounts
- The treatment of foreign passthru payments and gross proceeds has been reserved
- Identification and treatment of other deemed-compliant FFIs and exempt beneficial owners
- Third party service providers may be relied on but the FATCA obligations remain the responsibility of the “Reporting Financial Institutions”.
Deloitte has prepared a comparison document to highlight key differences between the Model IGAs and the final FATCA Regulations.
How can we help?
Deloitte has a FATCA global centre of excellence aimed specifically at helping our clients analyse their responsibilities and risks to develop a tailored FATCA implementation plan.
Our professionals have a deep understanding of the tax, operational, technology and regulatory implications of FATCA. We can:
- Advise on your FATCA obligations
- Identify and categorise all entities within scope
- Develop a compliance framework to meet your requirements
- Conduct a data mining exercise to identify US persons and classify client base according to a risk-based approach
- Advise on enhancements to data structure, collection, calculation and reporting processes
- Develop policies, procedures, workflows, new reporting and monitoring controls
- Staff training
- FACTA PMO and programme execution