The US Department of the Treasury (Treasury) and the Internal Revenue Service (IRS) released on February 20, 2014 two sets of final and temporary regulations. The first set contains changes to the provisions of Chapter 4 of the Internal Revenue Code (Code) commonly referred to as the Foreign Account Tax Compliance Act (FATCA Regulations). The second set of regulations coordinate the documentation standards, reporting, and withholding rules relating to payments made to non-US and US persons (Chapters 3 and 61 and Section 3406 of the Code) with the FATCA regulations.
According to the Treasury press release, the new guidance represents the last substantial package of regulations necessary to implement FATCA. As such, the regulations contain numerous changes to the previously issued regulations, with the impact to insurance companies varying dependent on the products, services offered, and onshore or offshore location of activities.
Time is of the essence with less than two months before the April 25 cut-off date in which entities must register to be on the first list of global intermediary identification numbers (GIINs) published by the IRS and less than four months before FATCA withholding begins to apply. Insurers should quickly assess these changes and incorporate any necessary adjustments into their FATCA implementation plans before the approaching FATCA effective dates.
This Insight describes the more notable differences between the final FATCA regulations and temporary regulations that will impact the insurance industry. Please also see an earlier PwC Insight released on February 28, 2014 which highlighted many of the updates provided in these final and temporary regulations for all industries.