The US tax authority has changed the temporary rules issued earlier in 2014, giving foreign financial institutions and witholding agents more time to comply with requirements under the legislation.

The Internal Revenue Service in the US has announced that it intends to amend the temporary regulations that were issued earlier this year under the Foreign Account Tax Compliant Act, giving foreign financial institutions and witholding agents additional time to comply with requirements for determining an account holder's foreign status.

The IRS said in an advance copy of Notice 2014-59 that withholding agents, foreign financial institutions and payers have until January 1, 2015 to apply new entity account procedures relating to FATCA.

The new notice was issued in response to comments received following the release of Notice 2014-33 earlier this year, which did not address new accounts opened after July 1, 2014, and before January 1, 2015.

The controversial legislation, signed in to law in late 2010, is designed to track down potential expat US citizens who might be evading tax; the measure threatens to levy a 30 per cent withholding tax on foreign financial institutions - a broad term - if they haven't shown they are complying with the act's provisions. Large banks such as Deutsche Bank and HSBC have ceased providing financial services to US citizens due to the compliance burden, although some others, such as Royal Bank of Canada, continue to do so.

Among further details of the adjustment, the IRS said Notice 2014-59 modifies the dates when provisions of the temporary regulations apply concerning:

-The standards of knowledge - i.e., the circumstance when a withholding agent has reason to know that a payee’s claim of foreign status is unreliable or incorrect;

-The documentary evidence standard - when an amount is considered paid outside the US and the types of documentary evidence permitted for establishing a payee’s foreign status for certain payments.

The changes will allow withholding agents, foreign financial institutions and payers to treat new accounts as pre-existing and also allow them to use documentary evidence other than withholding agreements as under the regulations that were in effect as of April 2013.

In May 2014, the IRS issued Notice 2014-33, announcing that 2014 and 2015 would be treated as transition years for purposes of IRS enforcement and administration with respect to the implementation of FATCA.