The Cayman Island Government has released an advisory to state that the US Treasury Department has announced that revised timelines for the implantation of the requirements of sections 1471 through 1474 of the Internal Revenue Code (Code) ("FATCA") have been agreed.
Further, additional guidance concerning the treatment of financial institutions located in jurisdictions that have signed intergovernmental agreements for the implementation of FATCA (IGAs), but have not yet brought those IGAs into force, has been issued.
New Implementation Timeline
Following a review of feedback received from industry that certain elements of the previously proposed phased timeline for the implementation of FATCA will present practical problems for both U.S. withholding agents and foreign financial institutions ("FFIs"), Treasury and the IRS in the United States have confirmed that it is intend to postpone by six months the start of FATCA withholding, and to make corresponding adjustments to various other time frames provided in the final regulations.
The new timelines are expected to be implemented as follows:
Timeline for Withholding
Withholding agents generally will be required to begin withholding on withholdable payments made after June 30, 2014, to payees that are FFIs or non-financial foreign entities ("NFFEs") with respect to obligations that are not grandfathered obligations, 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 definition of grandfathered obligation will be revised to include obligations outstanding on July 1, 2014 (and associated collateral).
Timeline for Implementing New Account Opening Procedures and the Definition of Preexisting Obligations
Withholding agents generally will be required to implement new account opening procedures by July 1, 2014, or, in the case of a participating FFI ("PFFI"), by the later of July 1, 2014 or the effective date of its FFI agreement.
Transition Rules for Completing Due Diligence on Pre-existing Obligations
The FFI Agreement of a PFFI that registers and receives a global intermediary identification number ("GIIN") from the IRS on or before June 30, 2014, will have an effective date of June 30, 2014, effectively resulting in a six-month postponement of the deadlines for completing due diligence on pre-existing obligations. For withholding agents other than PFFIs, the deadlines for completing due diligence on pre-existing obligations will be postponed by six months. Thus, for example, a withholding agent other than a PFFI will be required to document payees that are prima facie FFIs by December 31, 2014, instead of by June 30, 2014.
Due Date for First Report of a PFFI with respect to U.S. Accounts
Pursuant to the new timelines, the PFFI will be required to file information reports on its U.S. accounts with respect to the 2013 and 2014 calendar years no later than March 31, 2015. Treasury and the IRS intend to modify these rules to require reporting on March 31, 2015, only with respect to the 2014 calendar year (for U.S. accounts identified by December 31, 2014).
Timeline For Registration
The FATCA registration website is projected to be accessible to financial institutions on August 19, 2013. Other key dates for registration, however, will be extended by six months.
Treatment of Expiring Chapter 3 Documentation
Withholding certificates and documentary evidence for the purposes of chapter 3 withholding that would otherwise expire on December 31, 2013, will expire instead on June 30, 2014, unless a change in circumstances occurs that would otherwise render the withholding certificate or documentary evidence incorrect or unreliable.
Automatic Extension of Expiring QI, WP, and WT Agreements
All qualified intermediaries ("QI"), withholding foreign partnerships ("WP"), or withholding foreign trusts ("WT") agreements that would otherwise expire on December 31, 2013, will be automatically extended until June 30, 2014.
Extension of Foreign-Targeted Registered Obligation Rules
The transition rule that a withholding agent paying interest on an obligation issued in registered form after March 18, 2012, and before January 1, 2014, may apply the foreign-targeted registered obligation rules will be extended to obligations issued in registered form after March 18, 2012 and before July 1, 2014.
Treatment of Financial Institutions Operating in Jurisdictions That Have Signed an - Intergovernmental Agreement to Implement FATCA ("IGA")
A jurisdiction will be treated as having in effect an IGA if the jurisdiction is listed on the Treasury website as a jurisdiction that is treated as having an IGA in effect. That is (generally speaking) jurisdictions that have signed but have not yet brought into force an IGA. The list of jurisdictions that are treated as having an IGA in effect is available at the following address:
http://www.treasury.gov/resource-center/tax-policy/treaties/Pages/FATCA-Archive.aspx
The full text of the Cayman Islands Government Advisory is available to view here:
http://www.irs.gov/pub/irs-drop/n-13-43.pdf
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.
