The US Department of the Treasury (Treasury) and the Internal Revenue Service (IRS) have announced a six-month extension (to 1 July 2014) to the start of the Foreign Account Tax Compliance Act (FATCA) withholding and due diligence requirements in order to allow ‘more time to complete agreements with foreign jurisdictions’. The extension will also provide foreign financial institutions (FFIs) with more time to comply with FATCA ‘while helping to ensure efficient implementation of the law’. Enacted by Congress in 2010, FATCA introduced new customer identification, documentation, reporting and withholding procedures with the objective of targeting perceived tax abuse by US citizens through the use of offshore bank accounts. FFIs will be required to provide information on US accounts with a value exceeding $50,000, or be obliged to either terminate their relationship with the account holder or pay a 30% withholding tax applicable to the account holder’s income. The Treasury has collaborated with foreign governments to develop two alternative model intergovernmental agreements (IGAs) to help implement FATCA, particularly as regards compliance with national data protection laws. To date, the Treasury has signed nine IGAs, and ‘is engaged in related conversations’ with more than 80 other jurisdictions.
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