Home Knowledge US Foreign Account Tax Compliance Act (FATCA) Update

US Foreign Account Tax Compliance Act (FATCA) Update

November 16, 2012

Revised FATCA Start Dates

On 24 October the US Internal Revenue Service (IRS) issued a revised start date for compliance with or implementation of the FATCA. This postponement will somewhat relieve the administrative pressure on European fund managers to have all procedures and systems in place. 

As a result of these changes, Participating Foreign Financial Institutions (Participating FFIs) will now be required to implement the new client account procedures and due diligence by 1 January 2014, which is an extension of 6 months from 1 July 2013.  Due diligence on pre-existing FFI client accounts is now required to be completed by 30 June 2014, an extension of 6 months from 1 January 2014. 

Requirements to implement a FATCA withholding on gross proceeds from the sale of property that produces US source interest or dividends have been delayed until 1 January 2017.  In addition, the first reporting deadlines imposed on Participating FFIs for the reporting periods ending 2013 and 2014 have been pushed back to 31 March 2015. The information required to be reported remains unchanged and should include the name, address, taxpayer identification number, account number and account balance for both compliant and non-compliant or recalcitrant accounts.

Industry experts expect that these revised FATCA start dates could be extended again over the coming months.

Irish – US Intergovernmental Agreement expected before year end

A representative from the Irish Revenue Commissioners recently indicated that Ireland is close to agreeing the Irish – US Intergovernmental Agreement (IGA) with the IRS.  It is hoped that the IGA will be in place before the end of the year, and it is expected that the IGA will be referenced in the forthcoming Finance Bill 2013.

It is expected that the form of the IGA will mirror the UK – US Intergovernmental Agreement, whereby UK FFIs will report directly to HM Revenue & Custom, without the requirement to register with the IRS or indeed to implement the withholding requirements.

By entering into the IGA, Ireland should be able to address conflicts that arise between the FATCA requirements and Irish laws on data privacy and withholding, as well as reducing the overall regulatory burden on fund managers and administrators.

Action required by Investment Funds to ensure FATCA Compliance

The action required to be taken to comply with the FATCA requirements has  yet to be finalised but will include, at the very least, registration as an FFI with the Irish Revenue Commissioners by 31 December 2013 and an update of a fund’s prospectus and subscription documentation.  

For further information, please contact one of the key contacts listed above or your usual contact in our Asset Management and Investment Funds Team.