The commencement of withholding obligations under the United
States Foreign Account Tax Compliance Act (FATCA)
has been postponed by six months. This means that the Australian
Government now has more time to pass FATCA implementation
legislation and Australian financial institutions have more time to
prepare their systems for FATCA compliance.
Previously, the withholding commencement date was 1 January
2014. According to a notice recently published by the United States
Internal Revenue Service (IRS) (Notice 2013-43),
the regime will now commence on 30 June 2014.
FATCA will require the withholding of 30% of certain payments to
or from a non-US, 'foreign financial institution'
(FFI), if the ultimate recipient of that payment
is a US citizen or an entity controlled by a US citizen.
The IRS has also promised to publish an updated list of
countries that have entered into FATCA inter-governmental
agreements (IGA) with the United States
Government. The effect of an IGA is that FFIs domiciled in
signatory countries do not need to enter into individual 'FFI
agreements' with the IRS. For practical purposes, an FFI
Agreement significantly reduces an FFI's FATCA compliance
FFIs in countries whose government has not entered into an IGA
would need to enter into individual FFI Agreements with the IRS to
afford themselves this compliance relief.
Whilst we understand that the Australian Treasury is in talks
with the IRS in respect of a possible Australian IGA, any such
agreement is yet to be formally announced. The commencement delay
means, if anything, that the Australian Treasury has a further six
months to resolve outstanding issues.
In any event, Australian financial institutions should continue
working to be FATCA-ready.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
In the years following the global financial crisis of 2008 many Australian investors lost their life savings as financial products failed and the Australian Stock Exchange shed over 3,000 points.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).