Another delay in starting Foreign Account Tax Compliance Act (FATCA) is on the cards, according to rumours coming out of treaty talks in Taiwan.
If the rumours are true, this would be the third setback for President Barack Obama’s controversial law for US taxpayers with overseas bank accounts and investments.
FATCA is due to start on July 1, but anonymous officials involved in negotiating Taiwan’s tax treaty with the US Treasury have hinted the date will be pushed back again until January 1, 2015.
The original planned start date was January 1, 2014, but this was scrapped in favour of starting on June 1, 2014, due to implementation problems with banks and financial institutions.
Around 700,000 financial organisations worldwide need to realign their databases to extract data about US taxpayers who may directly hold accounts with them or manage accounts through trusts or companies.
Under resourced
The news coming out of Taiwan is the government is ready to sign a FATCA intergovernmental treaty with the US, but there is no hurry to ink the agreement as a postponement is expected.
The report was carried in newspaper The China Post
The reason for the delay is a deluge of paperwork US officials have to check and agree with governments and financial organisations.
Even the US Treasury and Internal Revenue Service (IRS) seem to have underestimated the resources required to complete their mammoth task.
However, the IRS has made clear that financial organisations must still sign up for FATCA through an online registration portal by April 25.
So far, American officials have remained tight-lipped about the rumour and have made no official announcement to confirm or deny the speculation.
FATCA protest
The news comes hot on the heels of a court rebuff in the States on a legal challenge to halt FATCA by the Florida Bankers Association.
The suit was given short shrift by the judge who reviewed the papers.
About 18 countries have officially signed up to FATCA, although another 30 or so are believed to be negotiating terms with the US Treasury.
FATCA requires foreign financial institutions controlled by US taxpayers to present an annual report detailing the owner of the account, any financial transactions in the tax year and the start and end balances.
The rules apply to any accounts with a balance of $50,000 at the year-end or that have seen $75,000 worth of transactions through the year.
This means financial firms have had to approach every customer to determine if they pay tax in the US in order to comply with the requirements of FATCA.
