IRS Announcement 2012-42Global Financial Services Industry |
Timelines for Due Diligence and Other Requirements under FATCA
On October 24, 2012 the IRS released Announcement 2012-42 which extends the deadlines for certain FATCA requirements. The Announcement presents new timelines for due diligence, withholding and reporting requirements that are in line with those in the Model IGA, and provides additional guidance on grandfathered obligations. The following are the key timeline changes announced and a graphic charting of the changes:
Effective Date of FFI Agreement
- FFI agreements will become effective on January 1, 2014 (changed from July 1, 2013) if entered into by December 31, 2013 (otherwise it is effective on the date entered into).
New Customer Onboarding
- The requirement to implement new customer onboarding procedures has also moved to January 1, 2014 for U.S. Withholding Agents, Participating FFIs, and Registered Deemed-Compliant FFIs (pushed back from January 1, 2013 for USWAs and July 1, 2014 for Participating FFIs and Registered Deemed-Compliant FFIs).
Preexisting Payees and Accounts
- The deadline that U.S. Withholding Agents, Participating FFIs, and Registered Deemed-Compliant FFIs must meet for documenting preexisting entity accounts that are held by Prima Facie FFIs has moved to June 30, 2014¹ (pushed back from December 31, 2013 for USWAs).
- U.S. Withholding Agents, Participating FFIs, and Registered Deemed-Compliant FFIs must document preexisting entity accounts not identified as Prima Facie FFIs by December 31, 2015² (pushed back from December 31, 2014 for USWAs and June 30, 2015 for Participating FFIs and Registered Deemed-Compliant FFIs).
- Preexisting individual account for high value clients must be documented by Participating FFIs by December 31, 2014³ (pushed back from June 30, 2014).
- FFIs have until December 31, 2015 to document preexisting individual account documentation for non-high value clients4(pushed back from June 30, 2015).
Withholding
- There is no change to withholding on income payments which begins on January 1, 2014.
- Withholding on gross proceeds now begins on January 1, 2017 (pushed back from January 1, 2015).
- There is no change to the requirement to withhold on foreign passthru withholding which begins no earlier than January 1, 2017.
Reporting
- Participating FFIs will be required to file the information reports with respect to the 2013 and 2014 calendar years no later than March 31, 2015 (pushed back from September 30, 2014).
Additionally, the Announcement states that the final regulations will broaden the scope of Grandfathered Obligations to include:
(1) any obligation that produces or could produce a foreign passthru payment and that cannot produce a withholdable payment, provided that the obligation is outstanding as of the date that is six months after the date on which final regulations defining the term “foreign passthru payment” are filed with the Federal Register;
(2) any instrument that gives rise to a withholdable payment solely because the instrument is treated as giving rise to a dividend equivalent pursuant to section 871(m) and the regulations thereunder, provided that the instrument is outstanding on the date that is six months after the date on which instruments of its type first become subject to such treatment; and
(3) any obligation to make a payment with respect to, or to repay, collateral
posted to secure obligations under a notional principal contract that is a grandfathered obligation.
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1 If the FFI signs an agreement after January 1, 2014, the deadline is 6 months from the effective date of the FFI agreement.
2 If the FFI signs an agreement after January 1, 2014, the deadline is 2 years from the effective date of the FFI agreement.
3 If the FFI signs an agreement after January 1, 2014, the deadline is 1 year from the effective date of the FFI agreement.
4 If the FFI signs an agreement after January 1, 2014, the deadline is 2 years from the effective date of the FFI agreement.
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