A lot of angst has been building within the tax and finance communities with respect to the upcoming implementation of the Foreign Account Tax Compliance Act (FATCA). The new rules involve forcing banks and financial institutions to provide more information about US client’s foreign accounts directly to the IRS, or be subject to a 30% withholding tax on income stemming from US financial assets .
U.S. tax authorities on Wednesday postponed implementation of new rules to force banks and financial institutions to disclose more information about U.S. clients’ offshore accounts.
IRS announced on October 24, 2012, that it will postpone some integral-tiered start up dates, which is a welcomed delay by many in industry adversely affected by implementation of the Act. FATCA rules have not been finalized, leaving many questions for those who will have to comply. This delay will push a key startup date for FATCA back two years from January 1st 2015 to January 1st 2017, to begin withholding US tax from clients’ investment gains. The delay also gives more time to institutions to comply and put procedures in place to meet FATCA reporting requirements.
The Treasury Department has been hard at work globally creating a network by which foreign banks and businesses have a means to comply with FATCA. In the past year the Treasury Department has been going country to country to create information sharing agreements. The United Kingdom is so far the only country that has finalized a FATCA pact, pending approval by Parliament. France, Germany, Italy, Switzerland, Spain, and Japan have pending agreements. The Treasury Department is negotiating with 40 countries for FATCA agreements, and these potential agreements are likely to be announced by the end of the year.