The 544-page document, which may be viewed by clicking here, will at last give non-US financial institutions the information they need to make the final preparations for collecting data on their American account holders.
The Foreign Account Tax Compliance Act (Fatca) was signed into law by President Obama in 2010, and is aimed at cracking down on American taxpayers who make use of foreign accounts to avoid their US tax obligations.
The document released last night does not directly affect UK financial insitutions, as these are to be covered by an intergovernmental agreement between the US and Britain, whereby UK institutions will forward the data on their American clients sought by the IRS to UK authorities, who in turn will forward it to the US. A number of other countries have agreed similar IGAs, and others are said to be in discussions aimed at doing so as well.
Jennifer Sponzilli, US tax partner for KPMG based in London, said: "Thankfully for the investment management industry, the Fatca final regulations generally align the definition of an investment entity as a financial institution with that in the IGAs (‘Inter-governmental agreements’) and provide a centralised reporting option for fund managers. There is still no further clarity, however, with regard to whether the umbrella fund or each sub fund must register under the final regulations.
She said the Fatca final regulations make clear that the registration (or Foreign Financial Institution Agreement (‘FFI’) execution, as appropriate) must be completed for all FFIs, within and without IGA counties, by 25 October 2013 in order for the FFI to be included in the IRS’s list of participating or registered deemed compliant FFIs by December 2013. FFIs not included in the December 2013 list may not be able to avoid withholding on 1 January 2014 for new accounts or contracts.
"While the Fatca final regulations bring much needed certainty to global financial institutions, the implementation time frame remains challenging with the first effective date less than a year away," she added.
In October, the US announced it would delay the starting dates of key parts of Fatca for those non-US financial institutions in countries not covered by an intergovernmental agreement with the US.This meant that for most institutions, the starting date would be January 2014, rather than 13. The announcement brought the Fatca reporting timings of companies located in countries that have not entered into an IGA with the US into line with companies located in such countries as the UK, France, Spain, Italy and Germany, which have.
Jorge Morley-Smith, head of tax of the Investment Management Association, which represents UK fund managers, said that it was too early to speak with a deep understanding of what the final Fatca regulations will mean, but that “on the face of it, it contains some really welcome elements”, including as a new concept of “sponsored reporting”, which will essentially enable fund managers to comply more easily than was the case in previous Fatca drafts.