The US Department of the Treasury and the Internal Revenue Service have issued a notice for foreign financial institutions (FFIs) to comply with the information reporting and withholding tax provisions of the Foreign Account Tax Compliance Act (FATCA).
The department said that it has signed nine IGAs till now and has reached 16 agreements in substance, and is engaged in related conversations with many more jurisdictions.
According to the Treasury Department, the notice, which is the next step in implementation, will preview proposed guidance and provide a draft agreement for participating FFIs directly engaging in agreements with the IRS and those reporting through a Model 2 intergovernmental agreement (IGA).
FFIs will also be provided with advance notice prior to the beginning of FATCA withholding and account due diligence requirements on 1 July 2014. The FFI agreement will be finalized by year end.
Robert Stack, deputy assistant secretary for International Tax Affairs, said: "The agreement and forthcoming guidance have been designed to minimize administrative burdens and related costs for foreign financial institutions and withholding agents.
"Today’s preview demonstrates the Administration’s commitment to ensuring full global cooperation and a smooth implementation," Stack added.
The Treasury has developed two alternative model IGAs to address the situations where foreign law would prevent an FFI from complying with the terms of an FFI agreement.
US Department of the Treasury said that the notice will incorporate updates to certain due diligence, withholding, and other reporting requirements, and will include a draft FFI agreement, that will be finalized by 31 December 2013. Treasury and the IRS will continue to provide more detailed guidance on FATCA implementation as necessary.
The regulations were intentionally designed to appropriately balance the scope of entities and accounts subject to FATCA with due diligence requirements, while also phasing in the related obligations over several years.