FATCA FFI Compliance Extended; FATCA Portal, Other Key Dates Pushed Back

FATCA FFI Compliance Extended; FATCA Portal, Other Key Dates Pushed Back

In a major U.S. Treasury announcement about FATCA on the morning of July 12, 2013, titled “Engaging with More than 80 Countries to Combat Offshore Tax Evasion and Improve Global Tax Compliance.” Treasury extended by six months the start of the Foreign Account Tax Compliance Act (FATCA) withholding and account due diligence requirements.  

Treasury stated that due to overwhelming interest from countries around the world, a six-month extension to will be provided to allow more time to complete agreements with foreign jurisdictions.” Boiled down, Treasury has granted a six- month extension, to July 1, 2014, for foreign financial institutions (FFIs) to achieve FATCA compliance because just three days before the FATCA Registration Portal should haveopened, only seven IGAs have been agreed to and signed by the United States and foreign countries.

FATCA Portal Opening Delayed

Moreover, on Monday, July 15, Treasury was supposed to open its FATCA Portal that foreign institutions could begin to register with the IRS.  However, the IRS released Notice 2013-43, 2013-31 IRB 1 in conjunction with Treasury’s announcement that its FATCA portal would not be available before August 19, 2013.  Thus, the IRS has had to push back the other key dates for registration by an additional six months, as well.  After the FATCA registration website opens, a financial institution will be able to begin the process of registering by creating an account and inputting the required information for itself, for its branch operations, and, if it serves as a “lead” financial institution, for other members of its expanded affiliated group. 

The IRS will not issue any global intermediary identification numbers (GIINs) in 2013. Instead it expects to begin issuing GIINs as registrations are finalized in 2014. The IRS will electronically post the first IRS FFI List by June 2, 2014, and will update the list on a monthly basis thereafter. To ensure inclusion in the June 2014 IRS FFI List, FFIs would need to finalize their registration by the new deadline of April 25, 2014 instead of the original October 25, 2013 deadline.

6-Month Extension for New Account Opening Procedures

FATCA withholding agents generally will be required to implement new account opening procedures by July 1, 2014 instead of January 1.  For Participating Foreign Financial Institutions (“PFFI”), new account opening procedures are correspondingly extended to at least July 1, 2014, but even further to the effective date of their FFI agreements if they register timely via the FATCA Portal.

 6-Month Extension for Pre-Existing Obligations

The IRS will modify the definition of “preexisting obligation” to take into account the new extended compliance deadlines.  Accordingly, the definition will be modified:

  • With respect to a withholding agent other than a PFFI or a registered deemed-compliant FFI: any account, instrument, or contract maintained, executed, or issued by the withholding agent that is outstanding on June 30, 2014;
  • With respect to a PFFI: any account, instrument, or contract maintained, executed, or issued by the PFFI that is outstanding on the effective date of the FFI agreement; and
  • With respect to a registered deemed-compliant FFI: any account, instrument, or contract maintained, executed or issued by the FFI prior to the later of July 1, 2014, or the date on which the FFI registers as a deemed-compliant FFI and receives a GIIN.

Deadline Extension Coordination with Current and Future Intergovernmental Agreements (IGAs)

Treasury intends to include a similar change to the definition of the term “Preexisting Account” in both model IGAs. Thus, it is expected that future IGAs will define the term “Preexisting Account” to mean a Financial Account maintained as of June 30, 2014.  For IGAs in force that contain the previous definition of the term “Preexisting Account,” the partner jurisdiction will be permitted under the coordination provision of the IGA to permit its FFIs to substitute the definition of the term “preexisting account” from the amended final regulations for the definition of the term “Preexisting Account” in the IGA. For IGAs concluded before the coordination provision was added, the coordination provision will apply through the operation of the most-favored nation provision once an IGA containing the coordination provision is in force.

2013 Eliminated As A FATCA Reportable Year

The final regulations provide that a PFFI will be required to file information reports on its U.S. accounts with respect to the 2013 and 2014 calendar years no later than March 31, 2015. Treasury and the IRS intend to modify these rules to require reporting on March 31, 2015, only with respect to the 2014 calendar year (for U.S. accounts identified by December 31, 2014). 

Treatment of Financial Institutions Operating in Jurisdictions That Have Signed an Intergovernmental Agreement to Implement FATCA

A jurisdiction will be treated as having in effect an IGA if the jurisdiction is listed on the Treasury website as a jurisdiction that is treated as having an IGA in effect. In general, Treasury and the IRS intend to include on this list jurisdictions that have signed but have not yet brought into force an IGA. The list of jurisdictions that are treated as having an IGA in effect is available at the following address:

http://www.treasury.gov/resource-center/tax-policy/treaties/Pages/FATCAArchive.aspx.

A financial institution resident in a jurisdiction that is treated as having an IGA in effect will be permitted to register on the FATCA registration website as a registered deemed-compliant FFI (which would include all reporting Model 1 FFIs) or PFFI (which would include all reporting Model 2 FFIs), as applicable. In addition, a financial institution may designate a branch located in such jurisdiction as not a limited branch.

 jurisdiction may be removed from the list of jurisdictions that are treated as having an IGA in effect if the jurisdiction fails to perform the steps necessary to bring the IGA into force within a reasonable period of time. If a jurisdiction is removed from the list, financial institutions that are residents of that jurisdiction, and branches that are located in that jurisdiction, will no longer be entitled to the status that would be provided under the IGA, and must update their status on the FATCA registration website accordingly.

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William H. Byrnes, IV is the Associate Dean of the Walter H. & Dorothy B. Diamond International Tax & Financial Services Graduate Program. He has achieved authoritative prominence with more than 38 book and compendium volumes, 93 book, treatise and supplement chapters, and 800 articles. Professionally, William Byrnes left Coopers and Lybrand as an Associate Director to full time academia wherein he pioneered online legal education in 1995, thereafter creating the first online LL.M. offered by an ABA accredited law school. He trains and supervises more than 200 professional and government LLM and JSD candidates annually for international tax and money laundering compliance.

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