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Foreign Account Tax Compliance Act (FATCA) Regulation Comparison

Global Financial Services Industry


FATCA, codified as Chapter 4 of the Internal Revenue Code, represents the United States Government's efforts to prevent U.S. taxpayers who hold financial assets in non-U.S. financial institutions (foreign financial institutions or FFIs) and other offshore vehicles from avoiding their U.S. tax obligations.

The U.S. Treasury Department and the IRS received numerous comments in response to the proposed regulations and used them in developing the final regulations. This report highlights many of the changes that occurred between the proposed regulations that were released on 15 February 2012 and the final regulations that were released on 17 January 2013.

The final regulations provide taxpayers and other affected stakeholders with a clearer picture of how FATCA will apply to affected transactions. Furthermore, financial institutions will be able to institute FATCA compliance measures with greater certainty. The final regulations amend certain provisions of the proposed regulations to take into account existing and anticipated IGAs between the U.S. and foreign governments. Among other changes, the definition of an FFI has been modified to more closely mirror the FFI definition in the IGAs, and the scope of deemed-compliant FFIs has been expanded. Although the issuance of the final regulations affords tax compliance professionals with additional clarity, the implementation of FATCA will remain a significant challenge.

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