Stakeholders patiently waiting for guidance regarding the Foreign Account Tax Compliance Act (FATCA) need not wait any longer — final regulations were issued along with a press release on January 17, 2013. FATCA was enacted as part of the Hiring Incentives to Restore Employment Act (HIRE Act) on March 18, 2010 to serve as an administrative tool to prevent and detect US tax evasion and improve taxpayer compliance. As a result, chapter 4 (Sections 1471 - 1474) was added to Subtitle A of the Internal Revenue Code. Chapter 4 expands the US information reporting regime by imposing documentation, withholding, and reporting requirements on payments to Foreign Financial Institutions (FFIs) and Non-Financial Foreign Entities (NFFEs).
The final regulations contain over 500 pages of guidance that will undoubtedly consume a significant amount of time as stakeholders including banks, investment funds, insurance companies, and their clients, study their content. The length of these regulations is not surprising given that FATCA's statutory provisions were intentionally broad and gave considerable discretion to the US Department of the Treasury (US Treasury) and the Internal Revenue Service (IRS) to narrow its scope when promulgating regulations.
The final regulations follow last February’s release of the proposed regulations. The government received hundreds of comment letters and held meetings with different stakeholders both inside and outside the financial services industry. The issuance of the final regulations also follows the conclusion of negotiations of several intergovernmental agreements (IGAs) between the US Treasury and various foreign governments addressing FATCA implementation.
This Newsbrief describes at a high level some of the notable distinctions between the proposed and final regulations as well as some essential and necessary actions for stakeholders to consider. PwC will issue additional Newsbriefs that will contain more detailed analyses.