IRS to Amend FATCA Regulations

The IRS has announced that it will be amending the FATCA (Foreign Tax Compliance Act) regulations to extend the period of time that certain transitional rules will apply, as well as to modify the rules for grandfathered obligations in relation to collateral held by withholding agents.  The official title of this notice is: Notice 2015-66, 3015-41 IRB.

FATCA requires withholding agents to withhold tax on certain payments to foreign financial institutions (FFI’s) if the FFI has not entered into an FFI agreement with the U.S., to, among other things, report certain information about U.S. accounts. 

The IRS intends to amend the chapter 4 regs under Code Sec. 1473 to extend the start date of gross proceeds withholding by providing that the definition of the term “withholdable payment” means any payment of U.S. source FDAP income, and for sales or other dispositions occurring after Dec. 31, 2018, any gross proceeds from the sale or other disposition of any property of a type that can produce interest or dividends that are U.S. source FDAP income. In addition, IRS intends to amend the regs under Code Sec. 1471 to extend the start date of withholding on foreign passthru payments to provide that a participating FFI is not required to withhold tax on a foreign passthru payment made to a recalcitrant account holder or a nonparticipating FFI before the later of: (i) Jan. 1, 2019, or (ii) the date that final regs defining the term “foreign passthru payment” are published in the Federal Register. ( Notice 2015-66 , Sec. III)

The information above is a very brief recap of the new regs.  Please contact our office if you would like to receive more information, or would like to discuss how these changes may affect you.