QI/FATCA Agenda July 2011

New Deadlines on the Agenda

IRS Notice 2011-53 – New Deadlines

The IRS has published new information on FATCA by releasing Notice 2011-53 and provides further guidance in terms of the beginning of the FATCA obligations. Notice 2011-53 may be seen as a reaction to numerous comments received by the industry in which relevant stakeholders emphasize the time challenge to develop compliance, reporting and withholding systems in order to comply with the FATCA provisions.

IRS Commissioner Dough Shulman, as quoted on the IRS homepage, said that “the IRS recognizes that implementing FATCA is a major undertaking for financial institutions. Today's notice is a reflection of our serious commitment to implementation of the statute, but also a serious commitment to listen to the implementation challenges of affected financial institutions and make appropriate adjustments to ensure a smooth and timely roll-out.”

In particular, the phased approach to implement FATCA contains the following deadlines:

• An FFI which wants to be identified by other withholding agents as participating FFI in sufficient time must enter into an FFI Agreement by 30 June 2013. The IRS stresses that FFIs entering into the FFI Agreement at a later stage may not receive their participating status and the respective EIN before 1 January 2014, and hence might suffer the 30% FATCA withholding tax temporarily until the participating FFI status has been confirmed.
   
• U.S. source FDAP payments to non-participating FFIs made on or after 1 January 2014 will trigger the 30% FATCA withholding tax to be withheld by withholding agents starting 2014;
   
• Passthru payment percentage of an FFI must not be computed and published before the end of the first calendar quarter of 2014.
   
• First reporting for accounts documented with Form W-9 and reporting of aggregate number and value of recalcitrant account holders must be filed by 30 September 2014;
   
• Other withholdable payments (including passthru payments and sales proceeds) made on or after 1 January 2015 will trigger the 30% FATCA withholding tax to be withheld by withholding agents starting 2015;
   
• Further guidance on FATCA will be published by 31 December 2011;
   
• Final regulation is anticipated in the summer of 2012.

Moreover, Notice 2011-53 provides some relief in relation to the timeline for performing the due diligence procedures required for pre-existing private banking accounts. Pre-existing private banking accounts having value or a balance of at least USD 500,000 need to be identified until 30 June 2014, pre-existing private banking accounts having value or a balance of less than USD 500,000 must be identified until 31 December 2014. All other pre-existing accounts have to be identified until 30 June 2015. Related to reporting requirements for W-9 documented accounts for the first year of reporting in 2014, Notice 2011-53 provides certain relief in connection with the granularity of data to be reported. In particular, in the first year of reporting it is not necessary to allocate payment to various baskets as outlined in Notice 2011-34.

IRS also announced that all QI Agreements, withholding foreign partnership agreements and withholding trust agreements of entities qualifying as FFI that expire on 31 December 2012 will be extended automatically until 31 December 2013. By entering into an FFI Agreement on or before 31 December 2013, the QI, withholding foreign partnership or withholding trust will be considered to have renewed its respective agreement.

• IRS Announcement
• Notice 2011-53