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FATCA - an update on the transition period
The US Department of the Treasury and the Internal Revenue Service (IRS) recently confirmed in Notice 2014-33 that the calendar years 2014 and 2015 will be regarded as a transition period for the purpose of IRS enforcement and FATCA administration. Taxand Ireland investigates what this notice period will entail.
Any enforcement actions under FATCA for this transition period will take into consideration the good faith efforts of withholding agents, foreign financial institutions (FFIs) and certain other entities. This transition period will also apply with respect to certain related due diligence and withholding provisions.
The Notice also provides for:
- Proposed amendments to FATCA regulations whereby accounts opened, executed or issued on or after 1 July 2014 and before 1 January 2015 would be treated as pre-existing obligations and subject to the same pre-existing account remediation deadlines as under the current regulations. These amendments will not apply to individual accounts
- Modifications to the requirements for a limited FFI or a branch of an FFI, including a disregarded entity owned by an FFI that is a member of an expanded affiliated group of FFIs
- Changes to the standards of knowledge for withholding agents for accounts documented before 1 July 2014
- A revision to the definition of a reasonable explanation of foreign status
- Future regulations will be issued to incorporate these changes however, until such time, Notice 2014-33 can be relied upon with immediate effect.
The scope of FATCA is far reaching and will impact beyond financial institutions. Trusts, estates and partnerships also come within the FATCA provisions and may also have obligations under FATCA.
Also published on Thomson Reuters' Taxnet Pro, 12 June 2014
It should be noted that Notice 2014-33 is limited in scope and many of the FATCA provisions still have an effective date of 1 July 2014. Multinationals concerned with their possible FATCA obligations should consult their tax advisors in a timely manner regarding the possible implications of FATCA to ensure that such compliance obligations are met in advance of deadlines.