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Final FATCA regulations are out


The US Treasury and IRS have published 544 pages of final regulations about how the controversial information reporting legislation should work.

The final regulations for the implementation of the Foreign Account Tax Compliance Act  cover the US account identification, information reporting and withholding requirements to avoid being liable for a 30% withholding tax on payments to foreign financial institutions (FFIs) with US account holders and certain non-financial foreign entities (NFFE) with substantial US owners. 

"These regulations give the Administration a powerful set of tools to combat offshore tax evasion effectively and efficiently," said Neal Wolin, Deputy Secretary of the Treasury. "The final rules mark a critical milestone in international cooperation on these issues, and they provide important clarity for foreign and US financial institutions."

The Treasury and IRS said that the final regulations:

  • build on intergovernmental agreements that foster international cooperation;

  • phase in the timelines for due diligence, reporting and withholding and align them with the intergovernmental agreements;

  • expand and clarify the scope of payments not subject to withholding;

  • refine and clarify the treatment of investment entities; and

  • clarify the compliance and verification obligations of FFIs

Norway has become the latest jurisdiction, after the UK, Mexico, Denmark, Ireland, Switzerland, and Spain, to signed or initial an intergovernmental agreement with the US.

FATCA was passed in March 2010 as part of the Hiring Incentives to Restore Employment Act.  Proposed regulations arrivedin February last year. In October, Announcement 2012-42, from the Treasury and IRS, made clear the intention to amend some provisions in the final regulations.

The final regulations were due out before the end of 2012. Critics of the legislation, because of the compliance burden it places on FFIs, hoped the delay meant that  the US would decide that it was impossible to implement and would abandon it. However, now that the official publication of the final regulations is imminent, that prospect has all but ended.

Compliance mechanics

Compliance with FATCA will take place through an online portal, which will be available from July 15 this year. Each FFI will use a GIIN (Global Intermediary Identification Number) to establish its FATCA status for withholding and to identify it for reporting purposes.

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