Last Wednesday, the US Treasury and IRS announced that jurisdictions that have reached agreements in substance with the US on the provisions of intergovernmental agreements under the Foreign Account Tax Compliance Act (\u201cFATCA\u201d) will be treated as having agreements in effect until December 31, 2014.<\/p>\n
Under FATCA, withholding agents are required to verify the status of foreign financial institutions (\u201cFFI\u2019s) starting July 1, 2014. \u00a0To encourage FFI\u2019s to report the foreign financial accounts held by US persons (which term includes US citizens and permanent residents and companies controlled by them), FATCA imposes a 30% withholding tax on an FFI\u2019s US source payments if the FFI does not comply with the FATCA reporting requirements. \u00a0The IRS will be able to use the information obtained from FFI\u2019s to ensure US persons disclosing their foreign financial bank accounts and other financial assets.<\/p>\n
The Treasury announcement will allow jurisdictions that reached agreements in substance before July 1, and consented to be included on a list, to be treated for FATCA purposes as having intergovernmental agreements in effect until December 31, 2014. \u00a0This will allow the FFI\u2019s in those countries to register on the FATCA website and avoid withholdings on their US activities.<\/p>\n