FATCA deferred amid global frustrations
15 July 2013
Category: News, Asia, Global
By David Macfarlane
The US Treasury Department announced on Friday (July 12) that due to overwhelming concern from countries around the world, financial institutions based outside of the US have been given six additional months to complete all the procedures necessary to comply with the Foreign Account Tax Compliance Act (FATCA). The delay is intended to provide foreign financial institutions with the time necessary to comply with FATCA while helping to ensure efficient implementation of the law.
The FATCA system is intended to stamp out the occurrence of tax evasion and the hiding of incomes by US taxpayers, requiring all foreign financial institutions to disclose information about their US clients, or collect a 30% withholding on any transactions passing through in the interest of an American taxpayer or in connection to any US derived incomes.
The withholding provision was scheduled to come into effect on January 1, 2014, but, according to the Treasury, the date has now been pushed back to June 30, 2014.
In response to the announcement, Keith Lawson, senior counsel, tax law, for the Investment Company Institute (ICI) and ICI Global, said: We appreciate that the US Treasury Department and the Internal Revenue Service have responded positively to our suggestions that funds and other financial institutions have additional time to implement FATCA, more administrable procedures, and necessary regulatory clarifications.
“This six-month delay will provide funds with significant additional time to implement FATCA’s many obligations with greater cost efficiency and to accommodate the successful and ongoing intergovernmental agreement initiative. These agreements will reduce further FATCA’s compliance burdens.”
He added: “ICI and ICI Global will continue our ongoing dialogue with the US and other governments to maximise the compliance benefits to governments of tax information collection and exchange while minimising the burdens on funds and their investors.”