United States: Timeline For Initial FATCA Implementation Extended

The Treasury Department ("Treasury") and the Internal Revenue Service (the "IRS") announced on July 12, 2013 a general six-month extension to the timeline for initial implementation of the Foreign Account Tax Compliance Act or FATCA from January 1, 2014 to July 1, 2014. They also substantially improved coordination of the FATCA registration process with Treasury's ongoing efforts in negotiating intergovernmental agreements on FATCA.


FATCA (contained in Sections 1471 through 1474 of the Internal Revenue Code) was enacted in 2010 in order to reduce perceived offshore tax evasion by US persons holding assets through offshore accounts that were not subject to US information reporting to the IRS. FATCA generally requires a foreign payee that is a foreign financial institution (an "FFI") either (1) to enter into an agreement with the IRS relating to such reporting (an "FFI Agreement", and such an FFI, a "Participating FFI") or (2) to comply with local laws that implement an intergovernmental agreement ("IGA"). If an FFI does not satisfy these requirements (and is not otherwise exempt), withholdable payments made to such FFI will be subject to withholding under FATCA at a rate of 30%. FATCA information reporting and withholding requirements generally do not apply to FFIs that are treated as deemed-compliant because they present a relatively low risk of being used for tax evasion or that are otherwise exempt or excepted from FATCA withholding.

On July 12, 2013, Treasury and the IRS issued Notice 2013-43 (the "Notice"), which, as described below, extends the period for entering into FFI Agreements and the date on which FATCA withholding will commence. Prior to the amendment of the final FATCA regulations (the "Final Regulations") to implement such extensions, taxpayers may rely on the Notice.

Timeline for Initial FATCA Implementation Generally Extended by Six Months

FATCA Withholding. Withholdable payments include: (1) US source interest, dividends, and other fixed or determinable annual or periodical ("FDAP") payments; (2) gross proceeds from the taxable disposition of property that produces US source interest or dividends; and (3) "foreign passthru payments," which generally are payments that are made by a Participating FFI and that are attributable to withholdable payments. Under the Notice, withholding, which had been scheduled to begin on January 1, 2014 under the Final Regulations, will now commence on July 1, 2014 for interest, dividends, and other FDAP payments. The Notice does not affect the timeline for implementing withholding in respect of payments of gross proceeds, which continues to begin January 1, 2017, and withholding on foreign passthru payments, which continues to begin no earlier than January 1, 2017.

Grandfathered Obligations. Under the Final Regulations, FATCA withholding will not apply to "grandfathered obligations." These include any obligation (not including equity instruments) outstanding on January 1, 2014 that is not materially modified thereafter and any debt obligation issued after December 31, 2013 pursuant to a "qualified reopening" of a debt instrument issued before January 1, 2014. The Notice announced that the definition of "grandfathered obligation" will be revised to include obligations outstanding on July 1, 2014 (and associated collateral).

Newly Opened Accounts. The Notice extends by six months (from January 1, 2014 to July 1, 2014) the start date for Participating FFIs to conduct due diligence to determine whether account holders of newly opened accounts (which includes certain debt and equity instruments) are US persons.

Pre-Existing Obligations. Pre-existing obligations are subject to special due diligence procedures for documenting the account holder. The Notice extends the cut-off date for pre-existing obligations by six months from December 31, 2013 to June 30, 2014. As a result, any account, instrument or contract maintained, executed or issued by a Participating FFI, registered deemed-compliant FFI or withholding agent that is outstanding on June 30, 2014 will be treated as a "pre-existing obligation.1 Thus, unless an account holder or payee is a prima facie FFI, Participating FFIs and withholding agents will have until June 30, 2016 to review pre-existing obligations and to document their holders. Payees that are prima facie FFIs must be documented by December 31, 2014 (instead of June 30, 2014).2

Pre-existing obligations held by individuals with a balance or value of no more than $50,000 (or $250,000 in the case of cash value insurance and annuity contracts)3 are exempt from this review, and enhanced due diligence procedures apply to pre-existing accounts with a balance or value in excess of $1,000,000. The Notice extends the relevant date for determining initial account values or balances by six months from December 31, 2013 to June 30, 2014.

Account Reporting. March 31, 2015 remains the due date for the first information report required to be filed by Participating FFIs, but the Notice limits required reporting to the 2014 calendar year and no longer includes account information as of the end of the 2013 year.

Effect of Extensions on FFIs Located in IGA Jurisdictions Treasury has developed in collaboration with foreign governments two alternative IGA models: the Model I IGA and the Model II IGA. IGAs allow foreign governments to implement FATCA in a manner that removes legal impediments to compliance in the relevant foreign country (e.g., bank secrecy laws) and that reduces compliance burdens on FFIs. The Final Regulations integrated the statutory FATCA regime with the IGA structure in many respects.

FFIs in Model II IGA countries (other than those excepted or exempted from FFI status or treated as deemed-compliant) are not relieved from the requirement to enter into an FFI Agreement in order to avoid FATCA withholding. By contrast, non-excepted and non-exempt FFIs located in Model I IGA countries generally are required to identify US accounts pursuant to due diligence rules adopted by the IGA partner country and to report specified information to the relevant governmental authorities of the IGA partner country and not directly to the IRS. This information will be automatically exchanged by the IGA partner country with the IRS. An FFI in a Model I IGA country that complies with its local due diligence and reporting requirements will be treated as a registered deemed-compliant FFI.

Numerous countries have signed IGAs or are in various stages of negotiating IGAs. In particular for FFIs in countries that have signed or intend to sign a Model I IGA, significant uncertainty has arisen regarding their appropriate registration if the IGA has not yet been brought into force through local implementing legislation by the time the registration process will be concluded in order to avoid FATCA withholding (see below). The Notice clarifies that the Treasury will publish a list of countries that have an IGA in effect or, even if the IGA has been signed but not yet brought into force, will be treated as having an IGA effect. The Treasury will publish this list at: http://www.treasury.gov/resouce-center/tax-policy/treaties/Pages/FATCA-Archive.aspx. If existing IGAs have less generous timelines than those under the Notice, the new timelines under the Notice and future amended regulations will generally apply through the operation of the "most-favored nation" provision of the IGA.

Extended Timeline for FFI Registration Process

The planned opening of the "FATCA Registration Portal" of the IRS was postponed under the Notice from July 15, 2013 until August 19, 2013. The Portal will allow appropriate registration for FFIs as Participating FFIs and, for FFIs in countries with which the Treasury has entered into an IGA (as described above), as registered deemed-compliant FFIs (where a Model I IGA applies) or Model II IGA Participating FFIs (where a Model II IGA applies). Applications for registration cannot be submitted as final before January 1, 2014, but under the Notice registration information will be able to be entered, modified or added beginning August 19, 2013.

In the preamble to the Final Regulations, the Treasury and the IRS announced that they would publish a revenue procedure with the terms and conditions applicable to FFIs for FATCA purposes prior to opening the FATCA Registration Portal. This revenue procedure has not yet been published. In April 2013, the IRS published a paper registration form (IRS Form 8957) that indicates the categories of information likely required from FFIs for the online registration process.

Once a financial institution has registered, the IRS must approve the registration and issue a "global intermediary identification number" (a "GIIN"). The Notice explains that the IRS will issue GIINs beginning in 2014 as registrations are finalized. The IRS intends to publish a monthly electronic "IRS FFI List" of Participating FFIs and registered deemed-compliant FFIs (including reporting FFIs in Model I IGA countries (see above)). Issuance of the first list will be postponed from December 2, 2013 to June 2, 2014. Consistent with this six-month extension, an FFI should finalize its registration at the Portal no later than April 25, 2014 (instead of October 25, Circular 230 Disclosure Any tax advice contained in this communication is not intended or written to be used, and cannot be used, for the purpose of avoiding tax penalties and is not intended to be used or referred to in promoting, marketing, or recommending a partnership or other entity, investment plan, or arrangement. 2013) to be included in the first IRS FFI List.

Circular 230 Disclosure

Any tax advice contained in this communication is not intended or written to be used, and cannot be used, for the purpose of avoiding tax penalties and is not intended to be used or referred to in promoting, marketing, or recommending a partnership or other entity, investment plan, or arrangement.


1. For a Participating FFI or registered deemed-compliant FFI whose FFI Agreement or registration is effective on a date after July 1, 2014, however, the relevant testing date for pre-existing obligations is the effective date of the agreement or registration.

2. If the FFI Agreement of a Participating FFI has an effective date after June 30, 2014, the timeline is six months from the effective date for documenting prima facie FFIs and 24 months from the effective date for all other accounts.

3. Insurance contracts with a value of no more than $50,000 will not be treated as financial accounts for FATCA purposes.

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.

Similar Articles
Relevancy Powered by MondaqAI
Shearman & Sterling LLP
Proskauer Rose LLP
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Shearman & Sterling LLP
Proskauer Rose LLP
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions