Daily Tax Report: Foreign Investment Vehicles and the New Foreign Account Tax Compliance Rules of the HIRE Act
James N. Calvin’s, partner, Deloitte Tax LLP, latest article in the March issue of Daily Tax Report discusses the latest chapter added to the Internal Revenue Code. The Hiring Incentives to Restore Employment (HIRE) Act, that was signed into law on March 18, 2010 and added the new chapter 4, provides for information reporting by third-parties of certain U.S. accounts held in foreign financial institutions (FFIs).
This piece discusses in detail the:
- Objective of chapter 4
- Operation of chapter 4
- FFI agreements
- Electing out of withholding responsibility
- Annual reporting requirements
- Foreign financial institution
- U.S. accounts that must be reported under FFI agreement
- Withhold-able payments to non-financial foreign entities
- Credits and refunds of withheld taxes
Any foreign investment vehicle that receives a U.S. source income, directly or indirectly, will be affected by chapter 4 irrespective of the size of the entity. In addition, all these entities will be required to have an agreement with the U.S. Treasury to avoid withholding. Further, implementation of a continuous process of verification, due diligence, and reporting is needed to comply with the agreement.
Download the attached article to learn more.