The U.S. Treasury and the IRS have provided revised timelines for implementing various requirements of the Foreign Account Tax Compliance Act.
The general effect of Notice 2013-43 is a six-month delay of effective dates until July 1, 2014.
Existing regulations, which provide rules on information reporting by foreign financial institutions (FFIs) and withholding on certain payments to FFIs and other foreign entities under the act, will be amended to reflect these changes. But taxpayers can rely on the notice until then.
Under the act, which is part of the Hiring Incentives to Restore Employment Act of 2010, U.S. withholding agents are required to withhold tax on certain payments to FFIs that do not agree to report certain information to the IRS regarding their U.S. accounts and on certain payments to some nonfinancial foreign entities (NFFEs) that do not provide information on their substantial U.S. owners to withholding agents.
The existing regulations provided for a phased-in implementation of these withholding requirements beginning Jan. 1, 2014. With the six-month postponement, withholding agents will be required to begin withholding on payments made after June 30, 2014, to payees that are FFIs or NFFEs for obligations that are not grandfathered in under the rules. The withholding requirements must be met unless the payments can be reliably associated with documentation on which the withholding agent can rely to treat the payments as exempt from withholding.
The notice also makes corresponding adjustments to various other time frames contained in the final regulations.
In addition to the deadline changes, the notice provides additional guidance concerning the treatment of financial institutions located in jurisdictions that have signed intergovernmental agreements for the implementation of the Foreign Account Tax Compliance Act but have not yet brought those agreements into force.