The delay brings the FATCA reporting timings of companies located in countries that have not entered into an intergovernmental agreement (IGA) with the US into line with companies located in such countries as the UK, France, Spain, Italy and Germany, which have.
Such IGAs, which were first announced in July, set out how companies located in these countries should provide the financial information on their US clients that is being sought by the Internal Revenue Service. Until now, these IGAs have given companies in these countries more time to prepare for FATCA than companies located elsewhere.
News of the delay by the US Internal Revenue Service came around midday on Wednesday Washington time, in the form of an emailed statement from the IRS to parties signed up to receive such notices.
As it stands now, non-US financial institutions (FFIs) located in non-IGA countries will have until 1 Jan 2017 to start withholding US tax from investment income received by their American account-holders, in order to comply with the new law, formally known as the Foreign Account Tax Compliance Act.
Procedures for meeting the FATCA reporting requirements by companies in non-IGA-signatory countries, meanwhile, must now be in place on 1 Jan 2014, a year later than had been thought to be the case until Wednesday’s announcement.
‘Relief, little surprise’
News of the delay in the starting dates – which had been staggered so that different elements of the new law’s many requirements would become effective at different times – was greeted with relief by the non-US financial services executives, if little surprise.
This is because it had become increasingly obvious that too little information necessary for companies to be able to implement FATCA had yet been provided by the US tax authorities, who have yet to issue the final FATCA rules.
Jorge Morley-Smith, head of tax at the London-based Investment Management Association, which represents the UK’s funds management industry, said the news was “welcome”, even though it didn’t technically change the FATCA reporting dates in the UK.
“Many of our members are multi-nationals, and manage funds all over the world, so clearly, we think the alignment of the deadlines is very good news, as it provides consistency of treatment in all the various countries in which our members have operations," he said.
David Treitel, managing director of American Tax Returns, which looks after expatriate Americans in the UK, said it was encouraging to discover that the IRS was “listening and caring” enough to seek to help those who were struggling to comply with the “overly complicated” FATCA rules, to the extent that they have been unveiled in draft form. But he noted that American taxpayers have already had to begin complying with some reporting elements of FATCA, and that many who have either never filed tax returns with the IRS or voluntarily come forward are still exposed to risk of potentially significant penalties, the new FATCA deadlines notwithstanding.
As reported, FATCA was signed into law in 2010 by President Obama as part of an effort to crack down on American taxpayers who make use of non-US accounts in order to evade paying US taxes on their non-US income.
It was introduced by lawmakers in the wake of several events that shone a spotlight on the existence and scale of such accounts, including a case brought against Swiss bank UBS by the US for its role in enabling US clients to avoid their tax obligations. As part of a settlement in 2009, UBS was forced to pay a fine and release the names of some 4,500 clients to the US authorities.
A number of countries and jurisdictions have announced recently that they are considering signing IGAs with the US, including Jersey, Guernsey, the Isle of Man, the Cayman Islands and New Zealand.