PwC: Still a long way to go for financial institutions to be ready for FATCA

Singapore, 9 February, 2012 – The United States Treasury Department and the Internal Revenue Service (IRS) have today issued proposed Regulations Relating to Information Reporting by Foreign Financial Institutions (FFIs) and Withholding on Certain Payments to Foreign Financial Institutions and Other Foreign Entities.

A joint statement was also released by the governments of the United States, France, Germany, Italy, Spain and the United Kingdom, stating that they are exploring a common approach to FATCA implementation through domestic reporting and reciprocal automatic information exchange. This statement also indicates that negotiations are in place so that UK FFIs may not need to enter into an FFI agreement with the IRS.

Mark Jansen, Partner, Financial Services Industry Practice, PwC LLP said:

“The proposed regulations appear to reduce the burden of implementation but leave financial institutions with a significant amount of work in order to ensure compliance. The impact of the intergovernmental approach also opens the door in Asia for increased working relationships across tax authorities.”

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Note:

  1. Enacted by Congress in 2010, the Foreign Account Tax Compliance Act (FATCA) targets non-compliance by US taxpayers paying tax on income which is offshore. FATCA requires FFIs to report information about financial accounts held by US taxpayers, or by foreign entities in which US taxpayers hold a substantial ownership interest to the IRS. The proposed regulations affect persons making certain US related payments to FFIs and other foreign entities and payments by FFIs to other persons.
  2. The US Treasury proposals can be found here.
  3. The joint statement between the USA, France, Germany, Italy, Spain and the UK can be found here.