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US releases further FATCA guidance


The US Treasury has today issued proposed regulations on the implementation of FATCA.

The proposed regulations implement FATCA’s obligations in stages to minimise burdens and costs consistent with achieving the statute’s compliance objectives.

The rules and implementation schedule are also adjusted to allow time for resolving local law limitations to which some foreign financial institutions (FFI) may be subject.

“When taxpayers overseas avoid paying what they owe, other Americans have to bear a disproportionate share of the tax burden. FATCA is an important part of the US government’s effort to address that issue, and these regulations implement FATCA in a way that is targeted and efficient. We believe these efforts will serve as a complement and catalyst to the ongoing global efforts to combat offshore tax evasion.” said Emily McMahon, acting assistant secretary for tax policy at the US Treasury.

The proposed regulations will:

  • Reduce the administrative burdens associated with identifying US accounts by calibrating due diligence requirements based on the value and risk profile of the account and by permitting FFIs in many cases to rely on information they already collect, including information received to comply with anti-money laundering/know your customer rules;

  • Expand the categories of FFIs that are deemed to comply with FATCA without the need to enter into an agreement with the IRS, to focus the application of FATCA on higher-risk financial institutions that provide services to the global investment community; and

  • Phase-in the reporting and withholding obligations of FATCA over an extended transition period to provide sufficient lead time for financial institutions to develop necessary systems and maximise the number of financial institutions that will be able to comply with FATCA.

After months of discussions with foreign governments, the Treasury also jointly issued a statement with France, Germany, Italy, Spain and the UK expressing mutual intent to pursue a government-to-government framework for implementing FATCA. This is seen as an important step toward addressing legal impediments to financial institutions’ ability to comply with the regulations.


"The proposed regulations appear to reduce the burden of implementation but leave financial institutions with a significant amount of work in order to ensure compliance," said Rob Bridson of PwC. "The impact of the intergovernmental approach which is finally adopted will also have an impact on what financial institutions are required to do to comply with FATCA."

"European financial institutions breathed a partial sigh of relief today," said Andrey Krahmal, of Allen & Overy. "This means not only that the burden of FATCA compliance may be lowered, but also that possible conflicts between FATCA compliance and local laws such as those relating to data protection might be avoided"

"For the first time, the US authorities have indicated that they are willing to reciprocate in the exchange of information on overseas investors investing into the US market," said Angela Foyle, of BDO. "This could have big implications for US firms and the flow of funds into the country.”

Further reading:

New FATCA guidance to lift compliance burden

FATCA: IRS is listening, says Shulman

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