IRS Issues Revised Timeline and Other Guidance Regarding the Implementation of FATCA
Faced with looming registration and implementation deadlines, the IRS issued Notice 2013-43 on July 12. In order to address short-term challenges and allow for a more orderly implementation of FATCA, the notice generally provides for a six-month extension of time for several FATCA compliance steps. Below are some of the highlights.*
- Extended timeline for withholding – Withholding agents generally will be required to begin withholding on “withholdable payments” made after June 30, 2014 to payees that are Foreign Financial Institutions (FFIs) or Non Financial Foreign Entities (NFFEs) with respect to obligations that are not grandfathered obligations unless the payments can be reliably associated with documentation on which the withholding agent can rely to treat the payments as exempt from withholding.
- Extended timeline for implementing new account opening procedures – Withholding agents will be required to implement new account opening procedures by July 1, 2014 or, in the case of a Participating FFI (PFFI), by the later of July 1, 2014 or the effective date of its FFI agreement.
- Transition rules for completing due diligence of preexisting obligations – The FFI agreement of a PFFI that registers and receives a Global Intermediary Identification Number (GIIN) on or before June 30, 2014, will have an effective date of June 30, 2014 which results in a six-month postponement of the deadlines for completing due diligence on preexisting obligations. For withholding agents other than PFFIs, the deadlines for completing due diligence on preexisting obligations will be postponed by six months (Prima Facie FFIs 12/31/14; other FFIs 6/30/16
- Timeline for registration – the FATCA registration website is projected to be accessible to financial institutions on August 19, 2013 (it was previously scheduled to be opened July 15, 2013). As the registration portal opens, financial institutions will be able to create an account and begin the registration process. Through December 31, 2013, a financial institution will be able to access its account to modify or add registration information, including to indicate the appropriate registration status (such as a status change resulting from the signing of an Intergovernmental Agreement (IGA)). Information stored in the registration system will not be considered final until after January 1, 2014, at which time the FFI will have to log on to the portal and submit its registration as final. This will allow financial institutions to become familiar with the registration process for the remainder of 2013.
- Issuance of Global Intermediary Identification Number – the IRS will not issue any GIINs in 2013, but rather in 2014 as registrations are finalized. The IRS will post its first FFI List by June 2, 2014, and will update the list on a monthly basis thereafter. To ensure inclusion on the June 2, 2014 listed FFIs would need to finalize their registrations by April 25, 2014.
- FFIs operating in IGA Countries- A jurisdiction will be treated as having in effect an IGA if it is listed on the Treasury website. The IRS and Treasury intend to include on this list all jurisdictions that have signed an IGA, but have not yet taken steps under their local law to bring their IGA into force. FFIs that are resident in a jurisdiction listed on the website will be able to register on the FATCA registration website as a registered deemed compliant FFI (Model 1 FFI) or a PFFI (including a Model 2 FFI). In addition, the IRS generally expects the revised timelines for withholding, due diligence, and other date-specific definitions to be effective for all IGAs (already signed and to be signed).
Although the notice does provide additional time, it is still important to have a FATCA action plan in place as soon as possible.
*For more information on FATCA, please see the previously issued articles:
Preparing for FATCA: An in-depth discussion of the issues, timeline and action plan for funds