Compliance
US Extends FATCA Withholding Requirement By Six Months
The US Department of the Treasury and the Internal Revenue Service have extended to July 1, 2014, the start of the Foreign Account Tax Compliance Act withholding and account due diligence requirements due to “overwhelming interest abroad.”
The extension gives foreign financial institutions enough time to comply with FATCA while ensuring efficient implementation of the law, the Treasury said.
FATCA, which targets non-compliance by US taxpayers using foreign accounts, requires financial institutions based outside the US to disclose the identity and activity of all of their US clients, or pay a 30 per cent withholding tax.
Since its enactment in 2010, the US has developed intergovernmental agreements that rely on governmental cooperation to facilitate the exchange of FATCA information. To date, the Treasury has signed nine IGAs, and is engaged in related conversations with some 80 other jurisdictions.
The first report of information under FATCA continues to be due in 2015, and will include information about accounts maintained during 2014.
The FATCA registration website will be open by August 19. Other deadlines, including expected timelines for the implementation of withholding on gross proceeds from sales of US securities and passthru payment withholding, remain unchanged.
Despite increased foreign interest, concerns remain over the implementation of the legislature. Findings from a recent survey by Satis Asset Management, for example, showed that over twice as many US expatriates are trying to renounce their citizenship since FATCA was signed into law. From 2010 to 2012 inclusively, an average of 1,416 people have renounced citizenship each year, the UK-based firm found. For the preceding seven years, from 2003 to 2009 inclusively, the average number was just 581 a year.
Other worries stem from the fact that the law also requires US citizens who are the clients of these institutions to report their overseas assets to the US tax authorities, or else face financial penalties. The legislation, meanwhile, also highlights how the global tax system operated by the US contrasts with a more territorial approach common in other nations.
