On April 2, the U.S. Treasury released Announcement 2014-17
under the Foreign Account Tax Compliance Act, sections 1471 through
1474 of the Internal Revenue Code ("FATCA"), broadening
the scope of when an intergovernmental agreement ("IGA")
is considered to be in effect and extending the registration
timeframe for foreign financial institutions
FATCA Overview. Pursuant to FATCA, beginning on July 1, a U.S. withholding agent (e.g., a U.S. person who is an obligor on a debt instrument issued after July 1 or an issuer of stock) will be required to withhold 30 percent of certain U.S. source payments (e.g., interest or dividends) made to an FFI (e.g., a non-U.S. bank or potentially a non-U.S. investment fund), unless the FFI (i) enters into an agreement with the IRS or is located in a jurisdiction that has entered into an IGA with the U.S., (ii) registers with the IRS and (iii) obtains a global intermediary identification number ("GIIN") that it provides to U.S. withholding agents, and satisfies or is exempt from IRS or other governmental reporting requirements with respect to U.S. account holders. For more information, visit Jones Day's website for our FATCA Commentaries ("Six-Month Extension of FATCA Deadlines—Another Joy of Summer," July 2013; "Treasury Issues Proposed Regulations on the Information Reporting and Withholding Tax Provisions of FATCA," April 2012; and "New FATCA Proposed Regulations: Eased Deadlines but the System Moves Forward," February 2012).
Broadened Scope of IGAs. The IRS maintains a published list identifying all jurisdictions that are treated as having an IGA with the U.S. (Model 1 or Model 2), including those jurisdictions that have signed IGAs that are not yet in effect. Pursuant to Announcement 2014-17, the IRS list will be expanded to include jurisdictions that, before July 1, have reached agreements "in substance" on the terms of an IGA, though not yet signed, and have consented to be included in the IRS list. Such IGAs will be considered in effect from the date the jurisdiction provides its consent through December 31. The IGA list can be found here.
Extended Registration Timeframe for FFIs. Pursuant to final regulations under FATCA, an FFI must register with the IRS on the FATCA registration website and obtain a GIIN that appears on an FFI list maintained by the IRS. For FFIs in Model 1 (but not Model 2) IGA jurisdictions, GIINs are not required until January 1, 2015. Pursuant to Announcement 2014-17, the IRS has extended the FFI registration date to May 5 for an FFI that wishes to have its GIIN included in the June 2 FFI list, and to June 3 for an FFI that wishes to have its GIIN included in the July 1 FFI list. For planning purposes, please note that the IRS is expected to continue to publish additional FFI lists beyond July 1, and withholding agents that receive a Form W-8 indicating the payee has applied for a GIIN have 90 days to verify the GIIN against the published FFI lists.
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