U.S. announces 6 month extension for FATCA withholding

The U.S. Department of the Treasury (Treasury) and the U.S. Internal Revenue Service (IRS) have announced an extension to certain key dates for the implementation of the Foreign Account Tax Compliance Act (FATCA).

The new timeline includes:

• a six month extension for the commencement of withholding obligations on U.S. source income (from 1 January 2014 until 1 July 2014)
• a change to the definition of grandfathered obligation to include obligations outstanding on 1 July 2014
  an extension of the timeline for foreign financial institutions to register with the IRS, with the IRS projecting the registration portal to be available on 19 August 2013, and
• an extension to the timeline for implementing new account opening procedures, reporting with respect to U.S. accounts and completing due diligence on pre-existing obligations.

The Treasury and the IRS have also indicated that they intend to provide on the Treasury website a list of jurisdictions that sign an intergovernmental agreement with the United States in relation to FATCA (IGA) that will be treated as being in effect, even though the IGA may not be in force as of 1 July 2014.

The extended timeline is welcome news, particularly for the Australian financial services industry, as an IGA between the United States and Australia has not yet been signed.

This article was written by Matthew Farnsworth, Senior Associate, and Fiona Smedley, Partner, Sydney.