Deuda

14 February 2012

International Tax Alert

Treasury and IRS issue proposed FATCA regulations
Treasury releases joint statement on intergovernmental agreement on FATCA implementation
Executive summary
On 8 February 2012, Treasury and the IRS issued long-awaited proposed regulations under the Foreign Account Tax Compliance Act (FATCA) provisions of Sections 1471 – 1474 (also referred to asthe “chapter 4” provisions). The proposed regulations address many, but not all, of the major items requiring further clarification following the three prior notices issued on FATCA. They also reflect the government’s considerable attention to comments it has received from affected financial institutions, foreign governments and other stakeholders on the magnitude of the burdens associated with thevarious elements of FATCA, incorporating approaches aimed at reducing the compliance burden while maintaining the policy objective of improved information reporting on US taxpayers with assets invested in non-US jurisdictions. At the same time the proposed regulations were released, Treasury also released a joint statement from the United States, France, Germany, Italy, Spain and the UnitedKingdom announcing an agreement to explore an intergovernmental approach to FATCA implementation that would allow foreign financial institutions (FFIs) in each country to provide the information required under FATCA to that country’s tax authorities rather than to the IRS.

The proposed regulations reflect significant modifications or elaborations in several key areas that are critical to FFI and toUS financial institutions, which are no longer referred to as “USFIs,” but rather are referred to as part of the larger population of “withholding agents.” The account identification requirements set forth in the proposed regulations incorporate substantial changes that are consistent with the extensive comments received. For preexisting accounts, the proposed regulations include enhanced deminimis exceptions, eliminate the controversial “private banking” rules proposed in Notice 2011-34, and generally allow an FFI to rely on an electronic review of its records for pre-existing accounts with a balance or value of $1 million or less. For new accounts, the proposed regulations reflect a greater reliance on documentation gathered for other purposes. These rules reflect an intention tominimize the circumstances in which FFIs would need to go back to account holders for additional documentation or modify account opening procedures on a going-forward basis. The proposed regulations extend qualification as a grandfathered obligation (which is not subject to FATCA withholding) to obligations outstanding on 1 January 2013. The proposed regulations also expand the categories of FFIs thatwill be deemed compliant with FATCA’s requirements. In addition, the proposed regulations provide greater
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flexibility in the treatment of FFIs in an affiliated group so that barriers to compliance by one affiliate will not taint the whole FFI group. The proposed regulations reflect a phase-in of dates for FATCA reporting requirements applicable to FFIs as follows: • The identity of USaccount holders must be reported starting in 2014 (for the 2013 calendar year); • Information about income on US accounts must be reported starting in 2016 (for the 2015 calendar year); and • Full information on US accounts, including information about gross proceeds, must be reported starting in 2017 (for the 2016 calendar year). In addition, the FATCA withholding rules for FFIs will not apply tocertain payments made before 1 January 2015, except for payments made to payees with certain indicia that they might in fact be FFIs (prima facie FFIs). However, NFFEs remain subject to potential FATCA withholding on US-source fixed or determinable income paid by USFIs beginning 1 January 2014, and on gross proceeds beginning 1 January 2015. Furthermore, US financial institutions must still begin to...