On Friday, the IRS said it was delaying for six months some of the deadlines for implementing the Foreign Account Tax Compliance Act (FATCA) originally set out in the final regulations issued in April in T.D. 9610 (Notice 2013-43).
The regulations, which provide rules on information reporting by foreign financial institutions (FFIs) and withholding on certain payments to FFIs and other foreign entities under FATCA, will be amended to reflect these changes, but taxpayers can rely on the notice until then.
Under FATCA, enacted as part of the Hiring Incentives to Restore Employment Act of 2010, P.L. 111-147, U.S. withholding agents are required to withhold tax on certain payments to FFIs that do not agree to report certain information to the IRS regarding their U.S. accounts and on certain payments to certain nonfinancial foreign entities (NFFEs) that do not provide information on their substantial U.S. owners to withholding agents.
The final regulations provided for a phased-in implementation of these withholding requirements beginning Jan. 1, 2014. Notice 2013-43 postpones by six months the start of FATCA withholding. Thus, withholding agents will be required to begin withholding on withholdable payments made after June 30, 2014, to payees that are FFIs or NFFEs for obligations that are not grandfathered under the rules unless the payments can be reliably associated with documentation on which the withholding agent can rely to treat the payments as exempt from withholding. The notice also makes corresponding adjustments to various other timeframes contained in the final regulations.
In addition to the deadline changes, Notice 2013-43 provides additional guidance concerning the treatment of financial institutions located in jurisdictions that have signed intergovernmental agreements for the implementation of FATCA (IGAs) but have not yet brought those IGAs into force.