Alternative Investment Management Association
The purpose of the Foreign Account Tax Compliance Act (FATCA) is to detect US taxpayers evading tax through offshore holdings. FATCA will require Foreign Financial Institutions (FFIs) to obtain and report information regarding US customers and beneficial owners to the Internal Revenue Service (IRS) or suffer 30% withholding tax on US sourced income. The IRS issued implementation guidance on certain issues during 2010-11 and (July 2011) introduced phased implementation of certain reporting and withholding requirements.
AIMA has made several written submissions to date and had discussions with key US Treasury and IRS officers with respect to issues facing hedge fund managers and proposals for practical approaches to implementation.
Draft regulations were issued on 8 February 2012, with a statement on the US, UK, FR, Italy, Spain and Germany having agreed to explore a common approach to FATCA implementation through domestic reporting and reciprocal automatic exchange, based on existing bilateral tax treaties (the statement then issued by the UK HM Treasury is here).
Consultation on the Draft Regulations closed on 30 April and final regulations are now expected by year end; a model FFI Agreement and reporting forms may not follow until early 2013.
On 24 October, the IRS announced further delayed implementation of reporting and withholding requirements and further guidance on grandfathered obligations - changes made in response to comments received on practical issues with the draft regulations and generally tracking changes made by the IGAs.
Implementation changes and timings are now as follow:
Intergovernmental exchange framework
A Model II, between the US, Japan and Switzerland, was announced in June: based on existing treaties with the US but FFIs would report direct to the US IRS, with reporting supplemented by information exchanged between the governments concerned, upon request.
A Model I form of intergovernmental agreement (IGA) between the US and the initial five ‘Partners’ was released in July 2012, providing for implementation through domestic reporting and reciprocal automatic exchange, based on existing bilateral tax treaties.
The IRS advised on 8 November on negotiations towards IGAs with over 50 jurisdictions, as here:
HMRC is consulting (until 22 November) on the UK-US bilateral agreement signed in September. The agreement carries the broadened definition of (and expanded treatment of) ‘Investment Entity’ included in the Model I IGA, so that it includes a manager or adviser as a FFI; AIMA submitted comments to the US authorities on this key issue in September. The agreement effectively postpones to January 2014 many of the due diligence requirements. Draft legislation and guidance is expected in December 2012 (possibly, effective July/August 2013).
Final Regulations (January 2013)
Draft Regulations (February 2012)
HMRC consultation on UK-US bilateral agreement (September 2012)
FATCA Q&A (updated February 2014)
Submission to US Treasury - FATCA Final Regulations (March 2013)
Submission to HMRC - Implementing the UK-US FATCA Agreement (November 2012)
Submission to UST & IRS on administrator issues (September 2012)
Submission to UST & IRS on Model I IGA (September 2012)
Update Note (May 2012)
Response to Draft Regulations (April 2012)
Update in AIMA Weekly News (February 2012)
Response to Notice 2010-60 - use of account of record (November 2011)
Submission on implementation issues and proposals (September 2011)
Response to Notice 2011-34 (June 2011)
Response to Notice 2010-60 (November 2010)
Submission on FATCA provisions (June 2010)
Update Note - FATCA (May 2010)
IRS press release on progress towards IGAs (November 2012)
Bilateral agreement UK-US (September 2012)
Model I IGA (July 2012)