With 89 days until many of the provisions of FATCA (Foreign Account Tax Compliance Act) take effect, a number of foreign financial institutions (FFIs) resident or organized in 20 different jurisdictions have been provided temporary intergovernmental agreement (IGA) FFI status until December 31, 2014. This ‘in effect’ status is the basis for determining the requirements for FFIs in these jurisdictions regarding IRS registration and the potential due diligence, withholding, and reporting obligations under FATCA. The ‘in effect’ status only applies to an institution resident in such country, but does not include branches located outside of such country. It also applies to any branch located in the IGA country.
This temporary status was provided in Announcement 2014-17 released on April 2, 2014 by the US Department of the Treasury (Treasury) and the Internal Revenue Service (IRS). The announcement, which was accompanied by a separate Treasury press release, provides two significant changes:
- An expansion of the circumstances in which the United States will treat a jurisdiction as having an IGA in effect through the end of 2014. The US Treasury expanded the list of jurisdictions deemed to have an IGA in effect which provides FFIs in those jurisdictions with much needed clarity as they prepare to comply with FATCA. To be included on the Treasury’s ‘in effect’ list, the partner country must agree in substance to an IGA before July 1, 2014 and consent to have the status of its IGA disclosed. Treasury has noted on its website an additional 20 jurisdictions in which IGAs are now treated as being in effect. FFIs in these jurisdictions are permitted to register consistent with their treatment under the relevant model IGA and will be permitted to certify their status to withholding agents consistent with that treatment.
- Extending the time by which FFIs must register with the IRS in order to be included on the first IRS FFI list, which is slated to be released on June 2, 2014. FFIs that must register with the IRS now have until May 5, 2014, instead of April 25, 2014 as originally announced, to register and be included on the first IRS FFI list. According to the announcement, FFIs that register by June 3, 2014 will be included on the second FFI list slated to be released on July 1, 2014