On July 12, 2013, the Internal Revenue Service (the “IRS”) released Notice 2013-43 (the “Notice”), which delays certain key dates for FATCA compliance.
- Pursuant to the Notice, the starting date for FATCA withholding with respect to new obligations has been delayed six months — from January 1, 2014, to July 1, 2014. This delay will have a ripple effect in pushing back other elements of FATCA compliance, including:
The definition of a grandfathered obligation (as to which no FATCA withholding will be required) will be revised to include obligations outstanding on July 1, 2014 (and associated collateral);
Withholding agents will be required to implement new account opening procedures (pursuant to which the FATCA status of their customers or investors is determined) on July 1, 2014. Customers admitted on or after this date will have to comply with the new procedures;
The definition of “pre-existing” accounts and obligations will be revised to mean generally such accounts or obligations in existence on June 30, 2014; and
Any FFI agreement entered into prior to July 1, 2014, will have an effective date of June 30, 2014. Accordingly, the timeliness for performing due diligence on the FATCA status of existing investors generally will all be pushed back by six months. The first round of diligence (on “prima facie” foreign financial institutions) will be required to be completed by December 31, 2014.1
- The first reports by participating foreign financial institutions (“FFIs”) on the accounts of their U.S. customers/investors will be due on March 31, 2015 and will relate to the 2014 year.
- The IRS FATCA registration portal will open by August 19 (rather than July 15). The IRS intends to give taxpayers the remainder of 2013 to submit and amend the information collected during the registration process. Accordingly, registrations will only be “final” after January 1, 2014. The IRS will electronically post the first list of participating FFIs by June 2, 2014, and will update the list on a monthly basis thereafter. To ensure inclusion in the first list, FFIs would need to finalize their registration by April 25, 2014.
- In general, the Treasury and the IRS intend to treat jurisdictions that have signed but have not yet brought into force an “intergovernmental agreement” (an “IGA”) as having brought that IGA into force. A list of jurisdictions that are treated as having an IGA in effect will be available on the Treasury’s website. Financial institutions in such jurisdictions will be able to register as “registered deemed-compliant” FFIs or as “participating” FFIs (depending on whether a Model 1 or Model 2 IGA applies) on the IRS website.
- This Notice does not affect the timing provided in the regulations (generally December 31, 2016, or later) for withholding on gross proceeds and pass-thru payments.
If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:Bogle-CharlesCarbone-AnthonyGouwar-JamesTraue-Jason
The Notice is silent regarding whether the timeline for withholding with respect to pre-existing obligations will be extended to correspond with the extended diligence timeline. We have been informally advised by the IRS that this matter is still under consideration.