Tax information reporting under the Foreign Account Tax Compliance Act | Brochure
Since December 2008, the Internal Revenue Service’s (IRS’s) designation of certain types of U.S. income tax withholding as a Tier I issue has been a clear signal to companies across industries that compliance with U.S. tax withholding and reporting requirements will be aggressively enforced.
Now, Congress has enacted and the IRS is getting ready to enforce a new chapter in the U.S. Internal Revenue Code (IRC) that specifically addresses foreign account tax compliance. The Foreign Account Tax Compliance Act (FATCA) seeks to identify U.S. taxpayers that have accounts at foreign financial institutions. It also attempts to enforce reporting of those accounts through withholding requirements that are similar to those required under IRC Sections 1441-3 — withholding on payments of U.S. source income to foreign persons.
Foreign financial institutions and other withholding agents may be required to apply up to a 30 percent withholding tax on payments in addition to disclosing U.S. account holders or recipients of payments that are subject to FATCA.
FATCA rules have many implications, both for withholding agents and payment recipients, including:
- A withholding agent is any business that has receipt, custody, control, or disposition over a payment from the United States that is considered to be fixed, determinable, annual, or periodical (such as interest, dividends, royalties, or rents) or gross proceeds from the sale or disposition of any property that can produce U.S. source interest or dividends. Withholding agents may include U.S. branches of non-U.S. financial institutions or any other type of U.S. business that makes such payments. The new rules require that withholding agents identify recipients of payments, the types of payments being made, and determine what type of reporting and, potentially, withholding is necessary. This could involve thousands of payments and recipients.
- Recipients must determine if they are classified as foreign financial institutions or non-financial foreign entities. Then, within those categories, they need to determine what information needs to be gathered for reporting to the IRS and whether they need to enter into compliance agreements with the IRS for annual reporting purposes.
There are many complexities associated with FATCA. Compliance with FATCA likely will involve changes to a withholding agent’s or recipient’s financial and tax systems and operations. And, there may be legal and regulatory implications, such as interaction with security and privacy.
Dealing with these issues may take professionals with experience in several disciplines. Does your organisation have the resources it needs?
Deloitte can help.
Although FATCA generally applies to payments made after December 31, 2012, businesses that may have exposure to the law’s provisions should conduct an assessment of their business operations well before that date. Planning and implementing changes to comply with FATCA could require considerable time and effort. For example, FATCA requires access to data not already compiled by most businesses’ information systems and functions.
Deloitte recognises that implementation of these changes may be complicated by location, number of businesses, and types of businesses. As a result, we have developed a global center of excellence aimed specifically at helping our clients analyse their responsibilities and tax compliance risks associated with the new law.
Our professionals have developed an understanding of the tax, operations, technology, and regulatory implications of FATCA. Specifically, we can help address the issues that may impact your organisation.
This brochure is available only in PDF format.
Page Last Updated