The US Internal Revenue Service (IRS) has launched an online registration programme for the many financial firms worldwide required to comply with the Foreign Account Tax Compliance Act (FATCA) or risk being shut out of financial markets.
Enacted in 2010, FATCA requires foreign banks, investment funds and insurance companies to report American offshore accounts worth more than US$50,000. It is set to take effect next year, although the US Treasury Department last month postponed the start of FATCA from January to July 2014. The IRS will publish a list of all the institutions that are complying with FATCA just before the effective date.
The registration process can be accessed on the IRS website. To register, a firm gives the IRS its name, mailing address, any branch offices and other basic information. The IRS will start approving firms’ registrations in 2014. The deadline for registration is 25 April 2014 if firms wish to avoid FATCA’s withholding penalties.
According to a Reuters report, tax lawyers suggest the fact that the registration process started on schedule marks a victory for the IRS, which has struggled to meet its own deadlines to implement FATCA, tax lawyers.
The news agency quoted Michael Silva, a partner at law firm DLA Piper, who said that before the registration process was finalised, firms did not know what information they would need to tell the IRS, making it difficult to prepare their internal systems.
“We finally have something tangible to put our teeth into,” said Silva, although he added that some challenges remain, particularly for foreign firms which will need to register in English.
It is also unclear whether US companies that have lending businesses abroad will need to comply with FATCA, Silva said. Many manufacturers have lending operations abroad to sell tractors and other products on credit.
Other examples include US equipment manufacturers that have finance arms abroad to finance their equipment. It is not yet clear if they must register.
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