News Analysis: A Look at Initial Guidance on the U.S. Foreign Account Tax Compliance Act
The U.S. Treasury Department and the IRS on August 27, 2010 issued initial and lengthy guidance under new Internal Revenue Code sections 1471-1474 (chapter 4). Chapter 4 is designed to prevent U.S. persons from evading U.S. tax by holding income-producing assets through accounts at foreign financial institutions (FFIs) or through other foreign entities (non-financial foreign entities, or NFFEs).
The law does so by imposing tough new withholding tax requirements on withholdable payments to foreign entities. The requirements generally take effect on January 1, 2013, subject to exceptions -- for example, for FFIs that enter into agreements with the IRS to identify and report on their U.S. accounts (FFI agreements) and for NFFEs that provide information about their substantial U.S. owners.
See the attached article for more information.