July 25, 2011 Tax Alert: IRS Releases Revised Notice 2011-53
On July 25, 2011, the IRS released revised Notice 2011-53 (the “Revised Notice”) that clarifies the application of the phased implementation of Chapter 4 Foreign Account Tax Compliance Act (FATCA) withholding to include certain payments to Non-Financial Foreign Entities (“NFFEs”). The original notice, released on July 14, 2011, limited the phase-in of FATCA withholding to payments made to Foreign Financial Intermediaries (“FFIs”) but was silent in regard to payments to NFFEs, thus leading to speculation on the extent of the transitional relief and its application to payments to NFFEs. The Revised Notice provides that Withholdable Payments of Fixed or Determinable Annual or Periodic income (FDAP) to NFFEs classified as Recalcitrant Account Holders will be phased-in beginning from January 1, 2014, and expanded to include Withholdable Payments of FDAP and gross proceeds from January 1, 2015.
The extension of withholding relief on payments to NFFEs is the only change between the original and Revised Notice. The Revised Notice will still be published in Internal Revenue Bulletin 2011-32 on August 8, 2011.
Click here to refer to the Tax Alert released on July 14, 2011, and based on the IRS’ clarification can be read to include payments to FFIs and NFFEs.