Summary of the New FATCA Notice

The new FATCA Notice announces that the Department of the Treasury and the IRS intend to amend the FATCA regulation to extend the period of time that certain transitional rules will apply. These extensions will allow FFIs and Local Authorities to maintain their “Compliant Status”, while they are working on changing their local laws, processes and systems to implement certain FATCA requirements.

Specifically, the amendments will extend:

  • FATCA Retentions on:
    • Withholdable Gross Proceeds (sale or other disposition of any property of a type that can produce interest or dividends that are U.S. source FDAP Income) – are now extended to commence on any payments made after the date of December 31st
    • Foreign Passthru Payments made to Recalcitrant Account Holders or Non Participating FFIs (definition of this type of payment is still pending) – are now extended to commence on any payments made after the date of December 31st 2018 (or later if the definition for this type of payment has yet to be included in the Federal Register).
  • Limited Status of Branches or Financial Institutions
    • The timing under which a branch or a Financial Entity can remain under the “Limited” status without negatively affecting the compliant status of their Head Office and/or Extended Affiliated Group has now been extended by one year (from the 31st of December 2015 to the 31st of December 2016). It is important to note that any FFI registered in the FATCA Portal as “Limited” will have to re-confirm this status after the first of January 2016 if they wish to retain it until the new deadline.
  • Sponsoring and Sponsored Entities:
    • Previously, Sponsoring Entities would register as a “Sponsoring Entity” and this GIIN could be used to document all the entities they were sponsoring until December 31st, 2015. At this time the IRS was aiming to update the FATCA Portal to enable the registration of each individual entity being sponsored to obtain their individual GIINs. This notice extends the time during which Sponsored Entities can still be documented (W8 Ben-E) and compliant under their Sponsors GIIN by one year (until December 31st, 2016). The Portal is still expected to be updated before the end of December of 2015 but individual “sponsored” entities will not have to register until December 31st, 2016.
      FATCA Compliance for FFIs in IGA Countries and FATCA 2014 Reporting:
    • For any countries where the IGA1 is not yet executed (signed in “substance” only or pending to be enacted into law) and the country is still demonstrating their will and commitment to implement the agreement, Treasury and the IRS are allowing an extension of 1 year on the deadline Local Authorities have for submission of 2014 FATCA reports. In other words, the 2014 reports can now be submitted before the 30th of September of 2016 along with the 2015 FATCA Reports. Individual FFIs in each of these countries will need to abide by the deadlines given to them by their respective local authorities.
    • For any countries where their IGA1s are already enacted into law, the FFIs will have to send their 2014 reports to their local authorities as previously stipulated on their IGA1 (30th September, 2015 or earlier as dictated by the local authority). However, a local authority can request an extension in the submission of the 2014 reports to the IRS. Here again, as long as the country has demonstrated its will and commitment to the execution of the agreement, the IRS is willing to grant these extensions for the transmission of 2014 reports and will consider the FFIs in those jurisdictions as “Compliant” despite not having received their 2014 reports.

The notice also covers a number of transitional reliefs on extensions and clarification related to Grandfathered Obligations and Collateral Obligations more focused on the FATCA responsibilities of a Withholding Agent. However, the changes detailed above, cover all the significant items impacting the Foreign Financial Institutions.

For any further clarification, please don’t hesitate to contact:

Etty Foodman; CFO – Foodman PA
Email: [email protected]
Tel: 1(305) 365-1111

Cathy McGrail; Marketing Director – Foodman PA
Email: [email protected]
Tel: 1(305) 365-1111