View all newsletters
Receive our newsletter - data, insights and analysis delivered to you
  1. News
February 9, 2012updated 04 Apr 2017 3:43pm

European countries agree key changes to FATCA

The United States has reached an agreement with France, Germany, Italy, Spain and the United Kingdom to simplify the collection of tax information for Foreign Account Tax Compliance Act (FATCA). One of the key parts of the agreement is to allow foreign financial institutions (FFIs) established in the five European countries to comply with FATCA reporting obligations by reporting information to the authorities in that country rather than directly to the Internal Revenue Service (IRS).

By Carlos Martin

The United States has reached an agreement with France, Germany, Italy, Spain and the United Kingdom to simplify the collection of tax information for Foreign Account Tax Compliance Act (FATCA).

One of the key parts of the agreement is to allow foreign financial institutions (FFIs) established in the five European countries to comply with FATCA reporting obligations by reporting information to the authorities in that country rather than directly to the Internal Revenue Service (IRS).

There has been widespread resistance to FATCA by the banking industry outside the US due to the legal impediments to compliance and onerous practical implementation FFIs were facing.

Importantly, Switzerland has not been included in the agreement.

 

FATCA proposal released

The agreement comes at the same time as the US Treasury and the IRS have released their 388-page proposal outlining a more detailed plan of how FATCA will be implemented.

The proposal lays out a step-by-step process for US account identification, information reporting, and withholding requirements for FFIs, other foreign entities, and US withholding agents.

The proposed regulations extend the scope of the information reporting regime that FFIs have to observe in US.

 

Public consultation open till 30 April

Under the proposed regulations, FFIs will have to enter into an agreement with the IRS to:

  • Identify US accounts,
  • Report certain information to the IRS regarding US accounts,
  • Verify its compliance with its obligations pursuant to the agreement, and
  • Ensure that a 30% tax on certain payments of U.S. source income is withheld when paid to non-participating FFIs and account holders who are unwilling to provide the required information.

FACTA was enacted by US Congress in 2010 and was expected to be in force by 2013, until a one-year delay was announced last year.

The public consultation period on the FATCA proposals closes on 30 April.

 

NEWSLETTER Sign up Tick the boxes of the newsletters you would like to receive. A weekly roundup of the latest news and analysis, sent every Wednesday. The industry's most comprehensive news and information delivered every month.
I consent to GlobalData UK Limited collecting my details provided via this form in accordance with the Privacy Policy
SUBSCRIBED

THANK YOU

Thank you for subscribing to Private Banker International