Insight

With the publication on 8 February 2012 of proposed regulations for compliance with the Foreign Account Tax Compliance Act (“FATCA”), the financial community is now better placed to understand the potential impact of FATCA and the steps required for compliance with its requirements.

Although the proposed regulations issued by the US Internal Revenue Service (“IRS”) and Department of Treasury (“US Treasury”) show that some attempt has been made to take on board concerns expressed over the impact of FATCA, the essential thrust of the legislation remains unaltered, requiring non-US financial firms to collect and report to the IRS information on US account holders and investors, and in some cases also collecting and remitting withholding tax. It is apparent from the proposed regulations that the IRS and US Treasury are themselves struggling to cope with the implications of FATCA, and hence they have also given themselves more breathing space.

While certain matters still remain to be clarified, including the format and precise content of the agreement which participating foreign financial institutions (“participating FFIs”) will be required to execute with the IRS by 30 June 2013 (a deadline which crucially has not been extended), the proposed regulations do at least provide some clarity regarding the extent of the challenge ahead, and may even allay some fears.

Please click here to read our full analysis, “FATCA: between a rock and a hard place”, which summarises the key features of the proposed regulations in the areas of due diligence, reporting and withholding, and considers the implications of FATCA for the investment funds industry.

For more information contact Nick Matthews or Matt Haddow