Final FATCA regulations issued: Let the compliance begin

January 2013


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.

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