Tax

FATCA Timeline After Deadline Changes

The IRS has pushed back the start date of FATCA – the Foreign Account Compliance Tax Act – from January 1, 2013 until January 1, 2014 – but what is the timeline for implementing the rules?

The underlying scope of FATCA has not changed – foreign financial institutions (FFIs) must send details of their US taxpayer customers and their earnings and holdings to the IRS from January 1, 2014.

  • FFIs must complete their due diligence on pre-existing US taxpayer accounts by June 30, 2014 – by pre-existing the act means held with the FFI before January 1, 2013
  • Due diligence on entities managed on or by US taxpayers can take up to December 31, 2015
  • The first deadline for FFIs to deliver account information to the IRS is extended from September 30, 2014 to March 31, 2015
  • This report will still cover information relating to the 2013 and 2014 calendar years.
  • The controversial 30% tax withholding provisions of FATCA for non-complying individuals and FFIs will start on January 31, 2017, not January 1, 2015, but withholding interest, dividends or other income from sources within the US still starts on January 1, 2014.

The announcement by the IRS gives more detail about due diligence and time limits https://www.irs.gov/pub/irs-drop/A-12-42.pdf

FATCA delay

FATCA is designed to ensure US taxpayers with financial holdings overseas are paying the correct tax.

However, banks, insurance companies and other financial institutions have struggled to put procedures in place to identify and report on their US clients in time for the original deadline of January 1, 2013.

The reporting process is further complicated by intergovernmental agreements that lessen the burden on FFIs by letting them send information via their government.

Although many countries have flagged their interest in the scheme, so far the only IGA signed is between the US and Britain. The agreement also has provisions for the US to pass financial information on UK taxpayers with holdings in the USA.

Other countries negotiating IGAs include Spain, France, Italy, Germany, Australia, New Zealand and India.

Many industry insiders believe the complexity of US and FFIs setting up systems for the IGAs has caused the deadline to slip, as prior to signing the agreement with the UK, US financial institutions did not have to identify their offshore customers.

1 thought on “FATCA Timeline After Deadline Changes”

  1. Pretty sad that a 200+ year old business can be sued out of existence by the Yanks when they have followed the laws of their OWN country.
    Sadly they have the power to throw their weight around all over the free world.
    On the other hand, the Chinese apparently told them to get lost.

    Reply

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