The US Department of the Treasury and the Internal Revenue Service (IRS) have agreed that a six-month extension to the start of the Foreign Account Tax Compliance Act (FATCA) withholding and account due diligence requirements will be provided, to allow more time to complete agreements with foreign jurisdictions.
The six-month extension, to 1 July 2014, will also provide foreign financial institutions (FFIs) with the time necessary to comply with FATCA while helping to ensure efficient implementation of the law.
“Given the groundswell of international interest in FATCA, we are providing an additional six months to complete agreements with countries and jurisdictions across the globe, before withholding begins,” said Treasury deputy assistant secretary for international tax affairs, Robert Stack.
“The high volume of international participation in this effort represents a quintessential race to the top. Every additional country we bring on board means we are one step closer to winning the fight against offshore tax evasion.”
Enacted by Congress in 2010, FATCA targets non-compliance by US taxpayers using foreign accounts and establishes a global approach to combatting offshore tax evasion. FATCA requires US financial institutions to withhold a portion of payments made to FFIs who do not agree to identify and report information on US account holders.
Commenting on the deadline extension, Jim Muir, director of data reconciliations specialist AutoRek said: “We have made comment in the past about regulators underestimating the impact of legislation on regulated entities. Often we bemoan the fact that this misjudgement causes huge planning disruption and much revenue for consultants but rarely has the desired impact of good legislation being implemented on time.
“It seems to me that the failure to understand the complexity of the changes that FATCA demands may be backfiring and will mean that the industry has less faith in meeting regulatory deadlines in the future.
“All that this dis-connectivity serves to do is to create tensions between the regulator and those regulated, damaging the perception of the financial services industry as a whole. To get the relationship between regulators, businesses, financial services and the public back on track, smaller, more manageable phases of change are the best way to get the desired results and encourage organisations to start taking compliance deadlines more seriously.”
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