2014 - gettechnicalinc.com · FATCA 3 ©gettechnical inc 2014 INSTRUCTOR Deborah Crawford is the...

FATCA Law supplement

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2014 Presented by: Gettechnical, Inc. 404 N. Burnside Ave. Suite A Gonzales, LA 70737 Phone: (800) 354-3051 Fax: (225) 644-1225 [email protected] www.gettechnicalinc.com

FATCA 2 ©gettechnical inc 2014 www.gettechnicalinc.com

The material used in this text has been drawn from sources believed to be reliable. Every effort has been made to assure the accuracy of the material; however, the accuracy of this information is not guaranteed. The laws are often changed without prior notice from the government. FATCA is sold with the understanding that the publisher and the editor are not engaging in the practice of law or accounting. We are not responsible for the actions of your company’s employees. The text is designed to address most teller compliance issues. However, you will wish to consult your attorney when you are unsure of an answer. Published by: gettechnical inc 404 N. Burnside Ave. Suite A Gonzales, LA 70737 Office: 1-800-354-3051 Fax: 225-644-1225 Website: www.gettechnicalinc.com Email: [email protected] All rights reserved. This material may not be reproduced in whole or in part in any form or by any means without written permission from the publishers. sm2014.04.25

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INSTRUCTOR

Deborah Crawford is the President of gettechnical inc, a Baton Rouge-based firm, specializing in the education of banks and credit unions across the nation. Her 28+ years of banking and teaching experience began at Hibernia National Bank in New Orleans. She graduated from Louisiana State University with both her bachelor's and master’s degrees. Deborah's specialty is in the deposit side of the financial institution where she teaches seminars on regulations, documentation, insurance and Individual Retirement Accounts. 225-644-1210 (Voice Mail for Debbie Crawford) 225-644-1225 (Fax) [email protected] (e-mail) www.gettechnicalinc.com (website)


TABLE OF CONTENTS

Overview ............................................................................................................................................8 IRS Guidance: Further Guidance on the Implementation of FATCA and Related Withholding Provisions (May 2014) .......................................................................................................................9 Treasury Fact Sheet: FATCA Amendments and Coordination Regulations (2/20/14) .....................19 Treasury Rulings: Links to February 14, 2014 rulings: .....................................................................22 Summary of FATCA Timelines .........................................................................................................23 Foreign Account Tax Compliance Act – Legal Documents and Notice Information .......................23 FATCA Information for Individuals ..................................................................................................24 Information for U.S. Taxpayers on Form 8938 Requirements ..........................................................26 Types of Foreign Assets and Whether They are Reportable on Form 8938 ......................................28 Comparison of Form 8938 and FBAR Requirements........................................................................29 FATCA Information for U.S. Financial Institutions and Entities ......................................................33 FATCA Information for Foreign Financial Institutions and Entities ................................................34 Revised Timeline and Other Guidance Regarding the Implementation of FATCA Notice 2013-43 36 Treasury Engaging with More than 80 Countries to Combat Offshore Tax Evasion and Improve Global Tax Compliance (7/12/2013) .................................................................................................48 Treasury and IRS Issue Final Regulations to Combat Offshore Tax Evasion (1/17/2013) ...............49 U.S. Engaging with More than 50 Jurisdictions to Curtail Offshore Tax Evasion (11/08/12) ..........53 Treasury, United Kingdom Sign Bilateral Agreement to Improve Tax Compliance, Combat Offshore Tax Evasion and Implement FATCA (9/14/2012) .............................................................55 Treasury Releases Model Intergovernmental Agreement for Implementing the Foreign Account Tax Compliance Act to Improve Offshore Tax Compliance and Reduce Burden (7/26/2012) ........56 Hiring Incentives to Restore Employment Act – Public Law 111-147 March 18, 2010 ...................58 Summary of Regulations Changes .....................................................................................................59 IRS Final Regulation: Regulations Relating to Information Reporting by Foreign Financial Institutions and Withholding on Certain Payments to Foreign Financial Institutions and Other Foreign Entities (1/11/13) ..................................................................................................................60 Regulations ........................................................................................................................................125


IRS Code: 26 U.S. Code Chapter 3....................................................................................................161 Information Reporting by Foreign Financial Institutions § 1.1471-0 Outline of regulation provisions for sections 1471 through 1474. .......................................................................................176 IRS Code: 26 U.S. Code Chapter 4....................................................................................................210

§ 1471 - Withholdable payments to foreign financial institutions ................................................210 § 1.1471-1 Scope of chapter 4 and definitions. .............................................................................215 §1.1471-1T Scope of chapter 4 and definitions (temporary). ........................................................231 § 1.1471-2 Requirement to deduct and withhold tax on withholdable payments to certain FFIs. ..............................................................................................................................................236 §1.1471-2T Requirement to deduct and withhold tax on withholdable payments to certain FFIs (temporary). ...........................................................................................................................248 § 1.1471-3 Identification of payee. ...............................................................................................252 §1.1471-3T Identification of payee (temporary). ..........................................................................313 § 1.1471-4 FFI agreement .............................................................................................................339 §1.1471-4T FFI Agreement (temporary). ......................................................................................383 § 1.1471-5 Definitions applicable to section 1471........................................................................395 §1.1471-5T Definitions applicable to section 1471 (temporary). ..................................................436 § 1.1471-6 Payments beneficially owned by exempt beneficial owners. .....................................451 §1.1471-6T Payments beneficially owned by exempt beneficial owners (temporary). ................456 § 1472 - Withholdable payments to other foreign entities ............................................................458 § 1.1472-1 Withholding on NFFEs. ..............................................................................................459 §1.1472-1T Withholding on NFFEs (temporary). .........................................................................466 § 1473 - Definitions ......................................................................................................................471 § 1.1473-1 Section 1473 definitions. ............................................................................................473 § 1474 - Special rules ....................................................................................................................487 § 1.1474-1 Liability for withheld tax and withholding agent reporting. .......................................489 §1.1474-1T Liability for withheld tax and withholding agent reporting (temporary). ..................504 § 1.1474-2 Adjustments for overwithholding or underwithholding of tax. ..................................509 § 1.1474-3 Withheld tax as credit to beneficial owner of income. ...............................................512 § 1.1474-4 Tax paid only once. .....................................................................................................512 § 1.1474-5 Refunds or credits. ......................................................................................................512 § 1.1474-6 Coordination of chapter 4 with other withholding provisions. ...................................514


§1.1474-6T Coordination of chapter 4 with other withholding provisions (temporary). ..............516 § 1.1474-7 Confidentiality of information. ...................................................................................517

IRS Code: 26 U.S. Code Chapter 3 Subchapter A Nonresident Aliens & Foreign Corporations .....518 § 1.1441 through 1446, including revisions to 1441-1 through 1441-7 .......................................518 § 1441 - Withholding of tax on nonresident aliens .......................................................................518 § 1.1441-1 Requirement for the deduction and withholding of tax on payments to foreign persons. .........................................................................................................................................529 §1.1441-1T Requirement for the deduction and withholding of tax on payments to foreign persons (temporary). .....................................................................................................................590 § 1.1441-2 Amounts subject to withholding. ................................................................................641 § 1.1441-3 Determination of amounts to be withheld...................................................................648 §1.1441-3T Determination of amounts to be withheld (temporary). ............................................657 § 1.1441-4 Exemptions from withholding for certain effectively connected income and other amounts. ........................................................................................................................................660 §1.1441-4T Exemptions from withholding for certain effectively connected income and other amounts (temporary). ...........................................................................................................671 § 1.1441-5 Withholding on payments to partnerships, trusts, and estates. ...................................674 §1.1441-5T Withholding on payments to partnerships, trusts, and estates (temporary). ..............691 26 CFR 1.1441-6 - Claim of reduced withholding under an income tax treaty. ...........................701 §1.1441-6T Claim of reduced withholding under an income tax treaty (temporary). ...................711 § 1.1441-7 General provisions relating to withholding agents. ....................................................716 §1.1441-7T General provisions relating to withholding agents (temporary). ...............................729 § 1442 - Withholding of tax on foreign corporations ...................................................................743 § 1446 – Withholding1 of tax on foreign partners’ share of effectively connected income .........759

Revenue Procedure 2014-13 ..............................................................................................................762 Publication 5118 Foreign Account Tax Compliance Act User Guide (Rev. 12-2013) .....................798 Forms .................................................................................................................................................799

Form: 8957 Foreign Account Tax Compliance Act (FATCA) Registration (Aug 2013) ............799 Instructions for Form 8957 ...........................................................................................................803 Form 8966: FATCA Report ..........................................................................................................810 Form 1042: Annual Withholding Tax Return For U.S. Source Income of Foreign Persons (2013) ............................................................................................................................................812 Instructions for Form 1042 (2013) ................................................................................................813


Form 1042: Annual Withholding TaxReturn for U.S. Source Income of Foreign Persons (2014) ............................................................................................................................................818 Form 1042-S: Foreign Person’s U.S. Source Income Subject to Withholding (2013) .................820 Instructions for Form 1042-S ........................................................................................................821


Overview


IRS Guidance: Further Guidance on the Implementation of FATCA and Related Withholding Provisions (May 2014) Further Guidance on the Implementation of FATCA and Related Withholding Provisions

Notice 2014-33

I. PURPOSE This notice announces that calendar years 2014 and 2015 will be regarded as a transition period for purposes of Internal Revenue Service (IRS) enforcement and administration with respect to the implementation of FATCA by withholding agents, foreign financial institutions (FFIs), and other entities with chapter 4 responsibilities, and with respect to certain related due diligence and withholding provisions under chapters 3 and 61, and section 3406, that were revised in regulations issued earlier this year as referenced in section II of this notice. This notice also announces the intention of the Department of the Treasury (Treasury) and the IRS to further amend the regulations under sections 1441, 1442, 1471, and 1472, as applicable, to provide: (i) that a withholding agent or FFI may treat an obligation (which includes an account) held by an entity that is opened, executed, or issued on or after July 1, 2014, and before January 1, 2015, as a preexisting obligation for purposes of sections 1471 and 1472, subject to certain modifications described in section IV of this notice; (ii) additional guidance under section 1471 concerning the requirements for an FFI (or a branch of an FFI, including a disregarded entity owned by an FFI) that is a member of an expanded affiliated group of FFIs to be treated as a limited FFI or limited branch, including the requirement for a limited FFI to register on the FATCA registration website; (iii) a modification to the standards of knowledge for withholding agents under §1.1441-7(b) for accounts documented before July 1, 2014; and (iv) a revision to the definition of a reasonable explanation of foreign status in §1.1471-3(e)(4)(viii). Prior to the issuance of these amendments, taxpayers may rely on the provisions of this notice regarding these proposed amendments to the regulations.

The transition period and other guidance described in this notice is intended to facilitate an orderly transition for withholding agent and FFI compliance with FATCA’s requirements, and responds to comments regarding certain aspects of the regulations under chapters 3 and 4.

II. BACKGROUND

A. Final and Temporary Regulations under Chapter 4

On March 18, 2010, the Hiring Incentives to Restore Employment Act of 2010, Pub. L. 111-147


(H.R. 2847), added chapter 4 to Subtitle A of the Code. Chapter 4 generally requires withholding agents to withhold at a 30 percent rate on certain payments to an FFI unless the FFI has entered into an agreement (FFI agreement) to obtain status as a participating FFI and to, among other things, report certain information with respect to U.S. accounts. Chapter 4 also imposes on withholding agents certain withholding, documentation, and reporting requirements with respect to certain payments made to certain non-financial foreign entities (NFFEs).

On January 17, 2013, Treasury and the IRS published final regulations under chapter 4 (TD 9610, 78 Fed. Reg. 5873) (final chapter 4 regulations). Following the publication of the final chapter 4 regulations, Treasury and the IRS issued Notice 2013-43 (2013-31 I.R.B. 113) to preview, among other things, a revised timeline for implementation of the FATCA requirements. On February 20, 2014, Treasury and the IRS released temporary regulations under chapter 4 (T.D. 9657, 79 Fed. Reg. 12,812) (temporary chapter 4 regulations) that clarify and modify certain provisions of the final chapter 4 regulations, including incorporating the revised timeline for the implementation of FATCA set forth in Notice 2013-43. The temporary chapter 4 regulations accordingly require that withholding agents (including participating FFIs, qualified intermediaries, withholding foreign partnerships, and withholding foreign trusts) begin withholding with respect to withholdable payments made on or after July 1, 2014, unless the withholding agent can reliably associate the payment with documentation upon which it is permitted to rely to treat the payment as exempt from withholding under chapter 4. On February 20, 2014, Treasury and the IRS also released temporary regulations under chapters 3 and 61, and section 3406 (T.D. 9658, 79 Fed. Reg. 12,726) (temporary coordination regulations), to coordinate those regulations with the requirements provided in the final and temporary chapter 4 regulations.

To date, the IRS has published updated final versions of all forms in the Forms W-8 series and certain instructions to these forms to incorporate the documentation requirements of chapter 4. The IRS expects to publish all of the remaining instructions in this series in the near future.

B. Intergovernmental Agreements (IGAs)

During 2012, Treasury first released Model 1 and Model 2 intergovernmental agreements (IGAs) to facilitate the implementation of FATCA and to avoid legal impediments under local law that would otherwise limit an FFI’s ability to comply with the requirements under chapter 4. On April 2, 2014, Treasury and the IRS published Announcement 2014-17 (2014-18 I.R.B. 1001), providing that the jurisdictions treated as having an IGA in effect would include jurisdictions that, before July 1, 2014, have reached agreements in substance with the United States on the terms of an IGA and that have consented to be included on the Treasury and IRS lists of such jurisdictions, in addition to jurisdictions that have already signed IGAs. An FFI that is resident in, or organized under the laws of, a jurisdiction that is included on the Treasury and


IRS lists as having an IGA in effect is permitted to register on the FATCA registration website and is permitted to certify to a withholding agent its status as an FFI covered by an IGA. As of May 1, 2014, Treasury had signed 30 IGAs, and had agreements in substance with 29 jurisdictions. A complete list can be found on Treasury’s website, available at http://www.treasury.gov/resource-center/tax-policy/treaties/Pages/FATCA.aspx.

III. TRANSITION PERIOD FOR ENFORCEMENT AND ADMINISTRATION OF COMPLIANCE Calendar years 2014 and 2015 will be regarded as a transition period for purposes of IRS enforcement and administration of the due diligence, reporting, and withholding provisions under chapter 4, as well as the provisions under chapters 3 and 61, and section 3406, to the extent those rules were modified by the temporary coordination regulations. With respect to this transition period, the IRS will take into account the extent to which a participating or deemed-compliant FFI, direct reporting NFFE, sponsoring entity, sponsored FFI, sponsored direct reporting NFFE, or withholding agent has made good faith efforts to comply with the requirements of the chapter 4 regulations and the temporary coordination regulations.

For example, the IRS will take into account whether a withholding agent has made reasonable efforts during the transition period to modify its account opening practices and procedures to document the chapter 4 status of payees, apply the standards of knowledge provided in chapter 4, and, in the absence of reliable documentation, apply the presumption rules of §1.1471-3(f). Additionally, for example, the IRS will consider the good faith efforts of a participating FFI, registered deemed-compliant FFI, or limited FFI to identify and facilitate the registration of each other member of its expanded affiliated group as required for purposes of satisfying the expanded affiliated group requirement under §1.1471-4(e)(1).

An entity that has not made good faith efforts to comply with the new requirements will not be given any relief from IRS enforcement during the transition period. Further, the IRS will not regard calendar years 2014 and 2015 as a transition period with respect to the requirements of chapters 3 and 61, and section 3406, that were not modified by the temporary coordination regulations. For example, the IRS will not provide transitional relief with respect to its enforcement regarding a withholding agent’s determinations of the character and source of payments for withholding and reporting purposes. The transition period for compliance provided in this notice is similar to other transition periods that the IRS has provided when it has introduced or significantly revised due diligence, reporting, and withholding rules. See, e.g., Notice 98-16 (1998-15 I.R.B 12), Notice 99-25 (1999-20 I.R.B 75), and Notice 2001-4 (2001-2 I.R.B. 267). IV. TREATMENT OF CERTAIN ENTITY OBLIGATIONS ISSUED, OPENED, OR


EXECUTED ON OR AFTER JULY 1, 2014

A. Chapter 4 Regulations

Under the chapter 4 regulations, withholding agents (other than participating FFIs and registered deemed-compliant FFIs) are generally required to implement new account opening procedures beginning on July 1, 2014. A participating FFI is required to implement new account opening procedures on the later of July 1, 2014, or the effective date of its FFI agreement, and a registered deemed-compliant FFI is required to implement new account opening procedures on the later of July 1, 2014, or the date on which the FFI registers as a deemed-compliant FFI and receives a global intermediary identification number (GIIN).

Comments received after the publication of the temporary chapter 4 regulations have indicated that the release dates of the final Forms W-8 and accompanying instructions present practical problems for both withholding agents and FFIs to implement new account opening procedures beginning on July 1, 2014. In consideration of these comments, Treasury and the IRS intend to amend the chapter 4 regulations to allow a withholding agent or FFI to treat an obligation held by an entity that is issued, opened, or executed on or after July 1, 2014, and before January 1, 2015, as a preexisting obligation for purposes of implementing the applicable due diligence, withholding, and reporting requirements under chapter 4. The proposed amendments to the chapter 4 regulations described in this section IV will be available only to obligations held by entities. The proposed amendments to the chapter 4 regulations will not be available for obligations held by individuals because the procedures for documenting individual accounts are less complex than those for documenting entities for chapter 4 purposes and the Form W-8BEN (for withholding agents to document individuals) and its accompanying instructions were published in final form on March 3, 2014.

More specifically, the proposed amendments will allow withholding agents and FFIs to treat any obligation held by an entity that is issued, opened, or executed on or after July 1, 2014, and before January 1, 2015, as a preexisting obligation for purposes of the due diligence and withholding requirements applicable to preexisting obligations described in §§1.1471-2(a)(4)(ii), 1.1472-1(b)(2), and 1.1471-4(c)(3), except that an FFI may not apply the documentation exception under §1.1471-4(c)(3)(iii).

As a result, a withholding agent that treats an obligation described in this section IV as a preexisting obligation will have the additional time provided in §1.1471-2(a)(4)(ii) or §1.1472- 1(b)(2) in order to document an entity that is a payee or account holder of the obligation to determine whether the entity is a payee subject to withholding under chapter 4. For example, a withholding agent may document an entity that is a payee of an obligation issued, opened, or executed on or after July 1, 2014, and before January 1, 2015, by December 31, 2014, if the payee is a prima facie FFI, or by June 30, 2016, in all other cases (as provided in §1.1471- 2(a)(4)(ii)).


A withholding agent would otherwise be required to document the entity by the earlier of the date a withholdable payment is made or within 90 days of the date the obligation is issued, opened, or executed.

An FFI that is a participating FFI or registered deemed-compliant FFI may also treat an obligation held by an entity that is issued, opened, or executed on or after July 1, 2014, and before January 1, 2015, as a preexisting obligation to document the obligation for chapter 4 purposes within the period permitted under §1.1471-4(c)(3)(ii) as if the effective date of its FFI agreement or the date on which the FFI registers as a deemed-compliant FFI and receives a GIIN is June 30, 2014, and may not exclude such accounts from review under §1.1471- 4(c)(3)(iii).

The proposed amendments to the chapter 4 regulations described in this notice will not otherwise affect the timelines provided in the final and temporary chapter 4 regulations for due diligence, reporting, or withholding and will not modify the starting date for an FFI to implement new account opening procedures with respect to accounts maintained by the FFI that are held by individuals. For example, if a withholding agent treats an obligation held by an entity that is issued, opened, or executed on or after July 1, 2014, and before January 1, 2015, as a preexisting obligation and receives a Form W-8BEN-E from the entity to document its status as a nonparticipating FFI, the withholding agent must begin withholding and reporting under chapter 4 when otherwise required for a preexisting obligation under the chapter 4 regulations.

B. Intergovernmental Agreements

The Model 1 and Model 2 IGAs contain a provision that allows a partner jurisdiction that has entered into an IGA to receive the benefit of certain more favorable terms that are set forth in a later signed IGA, including revisions to the procedures under Annex I of an applicable IGA, unless the partner jurisdiction declines in writing to adopt the update (the “most-favored nation” provision). With respect to FFIs covered by an IGA, Treasury intends to update the due diligence procedures described in Annex I of the Model 1 and Model 2 IGAs to incorporate due diligence procedures consistent with this notice.

Thus, it is expected that Annex I of future Model 1 and Model 2 IGAs will include a new due diligence procedures for an entity account opened on or after July 1, 2014, and before January 1, 2015, to allow an FFI covered by a Model 1 IGA or Model 2 IGA to treat such an account as a preexisting entity account, but without permitting application to such accounts of the $250,000 exception for preexisting entity accounts that are not required to be reviewed, identified, or reported. A partner jurisdiction with an IGA that has been signed or that has reached an agreement in substance will be permitted to adopt the revised due diligence procedures described above pursuant to the most-favored nation provision contained within its IGA, once an IGA with the revised procedures has been signed with another partner jurisdiction.


Annex I of the Model 1 IGA contains a provision that allows a partner jurisdiction to permit a reporting Model 1 FFI to rely on the procedures described in relevant U.S. Treasury regulations to establish whether an account is a U.S. reportable account or an account held by a nonparticipating financial institution. Annex I of the Model 2 IGA contains a provision that allows a reporting Model 2 FFI to rely on the procedures described in relevant U.S. Treasury regulations to establish whether an account is a U.S. reportable account or an account held by a nonparticipating financial institution. Prior to the publication of the proposed amendments to the chapter 4 regulations, a partner jurisdiction may rely on the provisions of this notice to permit a reporting Model 1 FFI to apply the due diligence procedures for documenting entity accounts described in this section IV. Similarly, prior to the publication of the proposed amendments to the chapter 4 regulations, a reporting Model 2 FFI may rely on the provisions of this notice to apply the due diligence procedures for documenting entity accounts described in this section IV.

V. MODIFICATION OF THE STANDARDS OF KNOWLEDGE RULES UNDER CHAPTER 3

A. Background on Reason to Know

The temporary coordination regulations, among other things, revised the reason to know standard under §1.1441-7(b) to provide that a withholding agent will have reason to know that documentation establishing the foreign status of a direct account holder is unreliable or incorrect if the withholding agent has a current telephone number for the account holder in the United States and no telephone number for the account holder outside the United States, or has a U.S. place of birth for the account holder. See §1.1441-7(b)(5) and (8). The addition of rules concerning a U.S. telephone number and a U.S. place of birth as U.S. indicia to the standards of knowledge for withholding agents was made in the temporary coordination regulations to coordinate with the standards of knowledge applicable to a withholding agent’s reliance on a payee’s claim of foreign status for chapter 4 purposes. The temporary coordination regulations also provide a transitional rule to allow a withholding agent that has previously documented the foreign status of a direct account holder for chapters 3 and 61 purposes prior to July 1, 2014, to continue to rely on such documentation without regard to whether the withholding agent has a U.S. telephone number or U.S. place of birth for the account holder. The withholding agent would, however, have reason to know that the documentation is unreliable or incorrect if the withholding agent is notified of a change in circumstances with respect to the account holder’s foreign status or the withholding agent reviews documentation for the account holder that contains a U.S. place of birth. See §1.1441- 7(b)(3)(ii).

B. Modification of the Standards of Knowledge

Commentators have noted that the transitional rule for preexisting obligations described in §1.1441-7(b)(3)(ii) has limited use for withholding agents because it is tied to a withholding


agent’s reliance on documentation obtained from an account holder prior to July 1, 2014, and may therefore not include cases in which a withholding agent renews a withholding certificate or documentary evidence on or after July 1, 2014, under the requirements of §1.1441- 1(e)(4)(ii)(A) (referring to the time period for renewal of certain withholding certificates or documentary evidence). Commentators further note that because of the extension until December 31, 2014, provided in the temporary coordination regulations for withholding agents to renew withholding certificates and documentary evidence that would have otherwise expired on December 31, 2013, withholding agents will have a significant number of accounts that were documented prior to July 1, 2014, but that will need to be re-documented by December 31, 2014, at which time they will no longer be able to rely on the transitional rule in §1.1441-7(b)(3)(ii) even if the renewal documentation does not include any information indicating a change in circumstances. See §1.1441-1(e)(4)(ii)(A) for the extended renewal allowance for withholding certifications and documentary evidence otherwise expiring on December 31, 2013.

Accordingly, Treasury and the IRS intend to amend the temporary coordination regulations to provide that a direct account holder will be considered documented prior to July 1, 2014, without regard to whether the withholding agent obtains renewal documentation for the account holder on or after July 1, 2014 pursuant to the requirements of §1.1441-1(e)(4)(ii)(A). Therefore, a withholding agent that has documented a direct account holder prior to July 1, 2014, is not required to apply the new reason to know standards relating to a U.S. telephone number or U.S. place of birth until the withholding agent is notified of a change in circumstances with respect to the account holder’s foreign status (other than renewal documentation that is required under §1.1441-1(e)(4)(ii)(A)) or reviews documentation for the account holder that contains a U.S. place of birth. See §1.1441-7(b)(3)(ii).

VI. REVISION OF THE DEFINTION OF REASONABLE STATEMENT UNDER CHAPTER 4

A. Background on Reasonable Explanation Supporting a Claim of Foreign Status

The final chapter 4 regulations in §1.1471-3(e)(4)(viii) and the temporary coordination regulations in §1.1441-7(b)(12) each provide that a withholding agent may rely on the foreign status of an individual account holder irrespective of certain U.S. indicia if, in certain cases, the account holder provides a reasonable explanation supporting the account holder’s claim of foreign status. Section 1.1441-7(b)(12) describes a reasonable explanation supporting a claim of foreign status for chapter 3 purposes as either a written statement prepared by an individual or a checklist provided by a withholding agent stating that the individual meets the requirements described in §1.1441-7(b)(12)(i) through (iv). Section 1.1471-3(e)(4)(viii) also describes a reasonable explanation supporting a claim of foreign status by an individual account holder for chapter 4 purposes, and it is substantially similar to the description under §1.1441- 7(b)(12),


except that it limits the contents of a reasonable statement provided by an individual account holder to the explanations permitted on the checklist. Thus, unlike the description provided in the temporary coordination regulations, the description provided in the final chapter 4 regulations does not permit an individual to provide a written explanation other than an explanation that the individual meets the requirements described in §1.1471-3(e)(4)(viii)(A) through (D).

B. Revision of Reasonable Explanation Prepared by an Individual

Commentators have noted that the description of a reasonable explanation of foreign status in the final chapter 4 regulations differs from the description provided in the temporary coordination regulations. Treasury and the IRS intend to amend the final chapter 4 regulations to adopt the description of a reasonable explanation of foreign status provided in the temporary coordination regulations, which permit an individual to provide a reasonable explanation that is not limited to an explanation meeting the requirements of §1.1471- 3(e)(4)(viii)(A) through (D).

VII. LIMITED FFIS AND LIMITED BRANCHES

A. Background

The final and temporary chapter 4 regulations require that for any member of an expanded affiliated group (as defined in §1.1471-5(i)(2)) to obtain status as a participating FFI or registered deemed-compliant FFI, each FFI member of the expanded affiliated group must have a chapter 4 status of a participating FFI, deemed-compliant FFI, exempt beneficial owner, or limited FFI. The final chapter 4 regulations also provide in §1.1471-4(e)(2)(iv) and (3)(iii) that an FFI or branch of a participating FFI must be registered with the IRS and agree to certain conditions in order to be treated as a limited FFI or limited branch. The conditions for limited FFI or limited branch status include, among other things, that the FFI or branch not open accounts that it is required to treat as U.S. accounts or accounts held by nonparticipating FFIs, including accounts transferred from any member of its expanded affiliate group.

The IRS’s FATCA registration website, available at www.irs.gov/FATCA, serves as the primary way for FFIs to register for status as a participating FFI, registered deemed-compliant FFI, or limited FFI. The FATCA registration website allows FFIs that are members of an expanded affiliated group to designate a lead financial institution (Lead FI) to identify member FFIs that will register as participating FFIs, registered deemed-compliant FFIs, or limited FFIs and to perform certain functions with respect to member FFIs. A Lead FI is not, however, required to act as a Lead FI for all FFIs within an expanded affiliated group.

B. Relief from Limited FFI and Limited Branch Restrictions on Account Opening.

FFIs and other stakeholders continue to express strong support for IGAs as a way to facilitate effective and efficient FATCA implementation while avoiding conflicts with local law. While


Treasury stands ready and willing to negotiate IGAs based on the published models, commentators have expressed practical concerns about the status of FFIs and branches of FFIs in jurisdictions that are slow to engage in IGA negotiations and that have legal restrictions impeding their ability to comply with FATCA, including the conditions for limited FFI or limited branch status under the chapter 4 regulations. Specifically, comments have noted that the restrictions imposed by the final chapter 4 regulations on a limited branch or limited FFI on opening any account that it is required to treat as a U.S. account or as held by a nonparticipating FFI hinders the ability of an FFI to agree to the conditions of limited status due, for example, to requirements under local law to provide individual residents with access to banking services or to the business needs of the FFI to secure funding from another FFI in the same jurisdiction with similar impediments to complying with the requirements of FATCA.

In response to these comments, Treasury and the IRS intend to amend the final chapter 4 regulations to permit a limited FFI or limited branch to open U.S. accounts for persons resident in the jurisdiction where the limited branch or limited FFI is located, and accounts for nonparticipating FFIs that are resident in that jurisdiction, provided that the limited FFI or limited branch does not solicit U.S. accounts from persons not resident in, or accounts held by nonparticipating FFIs that are not established in, the jurisdiction where the FFI (or branch) is located and the FFI (or branch) is not used by another FFI in its expanded affiliated group to circumvent the obligations of such other FFI under section 1471. This modification is consistent with the treatment of related entities and branches provided in the model IGAs.

C. Registration of Limited FFIs.

Commentators have also stated that certain jurisdictions are explicitly prohibiting an FFI resident in, or organized under the laws of, the jurisdiction from registering with the IRS and agreeing to any status, including status as a limited FFI, regardless of whether the FFI would otherwise be able to comply with the requirements of limited FFI status. Treasury and the IRS intend to amend the final chapter 4 regulations to provide that, if an FFI is prohibited under local law from registering as a limited FFI, the prohibition will not prevent the members of its expanded affiliated group from obtaining statuses as participating FFIs or registered deemed- compliant FFIs if the first-mentioned FFI is identified as a limited FFI on the FATCA registration website by a member of the expanded affiliated group that is a U.S. financial institution or an FFI seeking status as a participating FFI (including a reporting Model 2 FFI) or reporting Model 1 FFI. In order to identify the limited FFI, the member of the expanded affiliated group will be required to register as a Lead FI with respect to the limited FFI and provide the limited FFI’s information in Part II of the FATCA registration website. If the Lead FI is prohibited from identifying the limited FFI by its legal name, it will be sufficient if the Lead FI uses the term “Limited FFI” in place of its name and indicates the FFI’s jurisdiction of residence or organization.


By identifying a limited FFI in the FATCA registration website pursuant to this subsection VII.C, the Lead FI is confirming that: (1) the FFI made a representation to the Lead FI that it will meet the conditions for limited FFI status, (2) the FFI will notify the Lead FI within 30 days of the date that such FFI ceases to be a limited FFI because it either can no longer comply with the requirements for limited status or failed to comply with these requirements, or that the limited FFI can comply with the requirements of a participating FFI or deemed-compliant FFI and will separately register, to the extent required, to obtain its applicable chapter 4 status, and (3) the Lead FI, if it receives such notification or knows that the limited FFI has not complied with the conditions for limited FFI status or that the limited FFI can comply with the requirements of a participating FFI or deemed-compliant FFI, will, within 90 days of such notification or acquiring such knowledge, update the information on the FATCA registration website accordingly and will no longer be required to act as a Lead FI for the FFI. In the case in which the FFI can no longer comply or failed to comply with the requirements of limited FFI status, the Lead FI must delete the FFI from Part II of the FATCA registration website and must maintain a record of the date on which the FFI ceased to be a limited FFI and the circumstances of the limited FFI’s non- compliance that will be available to the IRS upon request.

VIII. DRAFTING INFORMATION

The principal author of this notice is Tara N. Ferris of the Office of Associate Chief Counsel (International). For further information regarding this notice, contact Ms. Ferris at (202) 317- 6942 (not a toll-free call).


Treasury Fact Sheet: FATCA Amendments and Coordination Regulations (2/20/14)

U.S. TREASURY DEPARTMENT OFFICE OF PUBLIC AFFAIRS

FACT SHEET: FATCA AMENDMENTS AND COORDINATION REGULATIONS 2/20/2014

The U.S. Department of the Treasury and Internal Revenue Service (IRS) today issued the last substantial package of regulations necessary to implement the Foreign Account Tax Compliance Act (FATCA), a provision that targets the illicit activities of some wealthy individuals who use offshore accounts to evade millions of dollars in taxes. International tax evasion is illegal, adds to the federal debt, and contributes to the perception that the tax system is unfair because the wealthy can avoid the taxes other Americans pay. To combat evasion, Congress enacted FATCA in 2010, and the IRS and Treasury issued final regulations in January 2013. Since then, Treasury and the IRS have received numerous comments with respect to those regulations and have continued active discussions with stakeholders in preparation for FATCA withholding, which will go into effect on July 1, 2014. The regulations issued today make additions and clarifications to the previously issued FATCA regulations and provide guidance to coordinate FATCA with preexisting due diligence, reporting, and withholding requirements under other provisions of the Internal Revenue Code. Key Elements of Today’s Regulations Amendments to FATCA Regulations to Take Into Account Stakeholder Comments Today’s regulations contain over 50 discrete amendments and clarifications to the FATCA regulations issued in January 2013 to provide clarifications and to take into account certain


stakeholder suggestions regarding ways to further reduce burdens consistent with the compliance objectives of the statute. Key amendments and clarifications include those relating to (i) the accommodation of direct reporting to the IRS, rather than to withholding agents, by certain entities regarding their substantial U.S. owners; (ii) the treatment of certain special-purpose debt securitization vehicles; (iii) the treatment of disregarded entities as branches of foreign financial institutions; (iv) the definition of an expanded affiliated group; and (v) transitional rules for collateral arrangements prior to 2017. Coordination of FATCA with Pre-Existing Reporting and Withholding Rules Today’s guidance also harmonizes the requirements contained in pre-FATCA rules under chapters 3 and 61 and section 3406 of the Internal Revenue Code with those under FATCA. Chapter 3 contains reporting and withholding rules relating to payments of certain U.S. source income (e.g., dividends on stock of U.S. companies) to non-US persons. Chapter 61 and section 3406 address the reporting and withholding requirements for various types of payments made to certain U.S. persons (U.S. non-exempt recipients). Today’s regulations coordinate these pre- FATCA regimes with the requirements under FATCA to integrate these rules, reduce burden (including certain duplicative information reporting obligations), and conform the due diligence, withholding, and reporting rules under these provisions to the extent appropriate in light of the separate objectives of each chapter or section. The changes relate to four key areas: Rules for Identification of Payees. Documentation requirements are central to

identification of payees under the chapter 3 and FATCA reporting and withholding regimes. The documentation requirements for withholding agents and foreign financial institutions (FFIs) under FATCA differ in certain respects from the corresponding documentation requirements for withholding agents under chapter 3. Today’s regulations remove inconsistencies in the chapter 3 and FATCA documentation requirements (including inconsistencies regarding presumption rules in the absence of valid documentation) based, in part, on stakeholder comments.

Coordination of the Withholding Requirements under Chapter 3, Section 3406, and FATCA. Chapter 3, section 3406, and FATCA require a payor to withhold under certain, potentially overlapping, circumstances. These temporary regulations provide rules to ensure that payments are not subject to withholding under both chapters 3 and FATCA, or under both section 3406 and FATCA.

Coordination of Chapter 61 and FATCA Regarding Information Reporting with Respect to U.S. Persons. FATCA generally requires FFIs to report certain information with respect to their U.S. accounts. In some cases, this reporting may be duplicative of the information required to be reported on Form 1099 with respect to the same U.S. accounts when the holders of such accounts are U.S. non-exempt recipients or the benefits of Form 1099 reporting to increasing voluntary compliance is not outweighed by the burden of overlapping information reporting requirements with respect to the same accounts.

o Under existing FATCA regulations, certain FFIs may be able to mitigate duplicative reporting under FATCA and chapter 61 by electing to satisfy their FATCA reporting obligations by reporting U.S. account holders on Form 1099


instead of reporting the account holder on the Form 8966 as required under FATCA. This election, however, is not expected to relieve burden for FFIs that are required to report on U.S. accounts pursuant to local laws implementing a Model 1 intergovernmental agreement (IGA). As previewed in Notice 2013-69, to further reduce burdens and mitigate instances of duplicative reporting under FATCA and chapter 61, today’s temporary regulations generally relieve non-U.S. payors from chapter 61 reporting to the extent the non-U.S. payor reports on the account in accordance with the FATCA regulations or an applicable IGA.

o Today’s regulations do not provide a similar exception to reporting under chapter 61 for U.S. payors. While some of the information reported by FFIs under FATCA on Form 8966 and under chapter 61 on Form 1099 may overlap, there are also significant differences. Most notably, the requirement under chapter 61 to furnish a copy of Form 1099 to the payee facilitates voluntary compliance, and there is no equivalent requirement for payee statements under FATCA. Moreover, U.S. payors generally have well-established systems for reporting and are subject to reporting on a broader range of payments under chapter 61 than non-U.S. payors. In light of these differences, the benefits of chapter 61 reporting by U.S. payors to the voluntary compliance system outweigh the reduction in burden that would be achieved by eliminating this reporting for U.S. payors that report on the same account under FATCA or an applicable IGA.

o Today’s regulations provide a new, limited exception to reporting under chapter 61 for both U.S. payors and non-U.S. payors that are FFIs required to report under chapter 4 or an applicable IGA with respect to payments that are not subject to withholding under chapter 3 or section 3406 and that are made to an account holder that is a presumed (but not known) U.S. non-exempt recipient. FFIs that are required to report under chapter 4 or an applicable IGA will provide information regarding account holders who are presumed U.S. non-exempt recipients. Moreover, such presumed U.S. non-exempt recipients may not actually be U.S. persons for whom the recipient copy of Form 1099 would be relevant to facilitate voluntary compliance. As a result, the IRS and Treasury believe that reporting under chapter 61 should be eliminated on payments to account holders who are presumed U.S. non-exempt recipients and for whom there is FATCA reporting.

o Today’s regulations provide a new, limited exception from reporting under chapter 61 for U.S. payors acting as stock transfer agents or paying agents of distributions from certain passive foreign investment companies (PFICs) made to U.S. persons. This exception is based, in part, on comments suggesting ways to reduce duplicative reporting with respect to PFIC shareholders. This exception would reduce burden while not significantly impacting taxpayer compliance.

Conforming Changes to the Regulations Implementing the Various Regimes. Today’s regulations also make numerous conforming changes, including (i) revising the examples in chapters 3 and 61 to take into account that payments in those examples may now be subject to FATCA; (ii) ensuring that defined terms in the FATCA regulations that are used in chapters 3 and 61 are appropriately cross-referenced; and (iii) unifying


definitions of terms used in chapters 3, 4 and 61. For more information, see our fact sheet (link), temporary and proposed regulations (link), and visit the Treasury FATCA page (link).

Treasury Rulings: Links to February 14, 2014 rulings: Revision of Regulations Regarding Withholding of Tax on Certain U.S. Source Income Paid to Foreign Persons, Information Reporting and Backup Withholding on Payments Made to Certain U.S. Persons, and Portfolio Interest Treatment

Link: http://www.treasury.gov/resource-center/tax-policy/treaties/Documents/Chapters%203,%2061%20coordinating%20regs.pdf Regulations Relating to Information Reporting by Foreign Financial Institutions and Withholding on Certain Payments to Foreign Financial Institutions and Other Foreign Entities

Link: http://www.treasury.gov/resource-center/tax-policy/treaties/Documents/FATCA.pdf


Summary of FATCA Timelines

Foreign Account Tax Compliance Act – Legal Documents and Notice Information For Individual Taxpayers:

TD 9567 - Temporary regulations relating to Reporting of Specified Foreign Financial Assets under IRC 6038D

REG-130302-110 - Proposed regulations relating to Reporting of Specified Foreign Financial Assets under IRC 6038D by certain domestic entities.

Explanation of temporary and proposed regulations relating to Reporting of Specified Foreign Financial Assets under IRC 6038D

Notice 2013-10 - Information Reporting by Domestic Entities Under Section 6038D with Respect to Specified Foreign Financial Assets

For Financial Institutions:

Notice 2013-43 - Revised Timeline and Other Guidance Regarding the Implementation of FATCA

TD 9610 - Regulations Relating to Information Reporting by Foreign Financial Institutions and Withholding on Certain Payments to Foreign Financial Institutions and Other Foreign Entities

Timelines for Due Diligence and Other Requirements Under FATCA - Announcement 2012-42 (PDF, 10-25-2012)

Proposed Regulations - Reg-121647-10 Regulations Relating to Information Reporting by Foreign Financial Institutions and Withholding on Certain Payments to Foreign Financial Institutions and Other Foreign Entities

Notice 2011-53 — Chapter 4, "Implementation Notice," describes the timeline for the implementation of FATCA and discusses matters that will be addressed in regulations by Treasury and the IRS.

Notice 2011-34 — "Supplemental Notice to Notice 2010-60, Providing Further Guidance and Requesting Comments on Certain Priority Issues Under Chapter 4 of Subtitle A of the Code"


Notice 2010-60 — "Notice and Request for Comments Regarding Implementation of Information Reporting and Withholding Under Chapter 4 of the Code," IRB 2010-37, dated September 13, 2010.

FATCA Information for Individuals U.S. citizens, U.S. individual residents, and a very limited number of nonresident individuals who own certain foreign financial accounts or other offshore assets (specified foreign financial assets) must report those assets Use Form 8938 to report these assets Attach Form 8938 to the annual income tax return (usually Form 1040) Taxpayers with a total value of specified foreign financial assets below a certain threshold do not have to file Form 8938 If the total value is at or below $50,000 at the end of the tax year, there is no reporting requirement for the year, unless the total value was more than $75,000 at any time during the tax year The threshold is higher for individuals who live outside the United States Thresholds are different for married and single taxpayers Taxpayers who do not have to file an income tax return for the tax year do not have to file Form 8938, regardless of the value of their specified foreign financial assets. Penalties apply for failure to file accurately

Alert: The reporting requirement for Form 8938 is separate from the reporting requirement for the FinCEN Form 114, Report of Foreign Bank and Financial Accounts (“FBAR”) (formerly TD F 90-22.1). An individual may have to file both forms and separate penalties may apply for failure to file each form. See the Comparison of filing requirements for further information.

Third-party reporting: Foreign financial institutions may provide to the IRS third-party information reporting about financial accounts, including the identity and certain financial information associated with the account, which they maintain offshore on behalf of U.S. individual account holders.

Application to domestic entities: The IRS anticipates issuing regulations that will require a domestic entity to file Form 8938 if the entity is formed or used to hold specified foreign financial assets and the total asset value exceeds the appropriate reporting threshold. Until the


IRS issues such regulations, only individuals must file Form 8938. For more information about domestic entity filing, see Notice 2013-10.


Information for U.S. Taxpayers on Form 8938 Requirements Under FATCA, certain U.S. taxpayers holding financial assets outside the United States must report those assets to the IRS, generally using Form 8938, Statement of Specified Foreign Financial Assets. The Form 8938 must be attached to the taxpayer’s annual tax return. Uncertain whether you have to file? Generally, aggregate value of these assets must exceed $50,000, but in some cases, the threshold may be higher.

Unclear about what qualifies as a specified foreign financial asset? Here’s a chart that can help.

You may also have to file Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR). This comparison table will help you figure out whether you also need to file the FBAR.

Still looking for more answers? View the frequently-asked-questions (FAQs) for Form 8938 for information on real estate, foreign assets held in U.S.-based financial accounts, foreign pensions, valuing certain assets and more.

Failure to report foreign financial assets on Form 8938 may result in a penalty of $10,000 (and a penalty up to $50,000 for continued failure after IRS notification). Further, underpayments of tax attributable to non-disclosed foreign financial assets will be subject to an additional substantial understatement penalty of 40 percent. The IRS anticipates issuing regulations that will require a domestic entity to file Form 8938 if the entity is formed or used to hold specified foreign financial assets and the assets exceeds the appropriate reporting threshold. Until the IRS issues such regulations, only individuals must file Form 8938. For more information about domestic entity filing, see Notice 2013-10. Notice 2013-10: Information Reporting by Domestic Entities under Section 6038D with Respect to Specified Foreign Financial Assets This notice provides guidance to domestic entities concerning the first taxable year certain domestic entities will be required to report interests in specified foreign financial assets under section 6038D of the Internal Revenue Code (Code). Section 6038D was enacted by section 511 of the Hiring Incentives to Restore Employment Act, Pub. L. No. 111-147, 124 Stat. 71 (the HIRE Act), and applies to taxable years beginning after March 18, 2010. Section 6038D(a) requires an individual who holds any interest in a specified foreign financial asset during any taxable year to attach a statement to that individual’s return of tax imposed by subtitle A of the Code for the taxable year to report the information identified in section 6038D(c) if the aggregate value of all such assets in which the individual holds an


interest exceeds $50,000 (or such higher amount as the Secretary may specify) for such taxable year. Section 6038D(f) authorizes the Secretary to issue regulations or other guidance applying the provisions of section 6038D to any domestic entity as if the domestic entity were an individual, if the domestic entity is formed or availed of for purposes of holding, directly or indirectly, specified foreign financial assets. On December 19, 2011, the Internal Revenue Service (IRS) and the Department of the Treasury (Treasury Department) published temporary regulations providing guidance to individuals required to report specified foreign financial assets with their annual return pursuant to section 6038D. TD 9567, 76 FR 78553, 2012-1 C.B. 395. On December 19, 2011, the IRS and the Treasury Department also published a notice of proposed rulemaking that cross-referenced those temporary regulations and also included Prop. Reg. §1.6038D- 6. REG-130302-10, 76 FR 78594, 2012-1 C.B. 412. Prop. Reg. §1.6038D-6 sets out the conditions under which a domestic entity will be considered a specified domestic entity and, therefore, required to report specified foreign financial assets in which the entity holds an interest. Prop. Reg. §1.6038D-6 is proposed to apply to taxable years beginning after December 31, 2011. The IRS and the Treasury Department intend that, when final regulations are issued under section 6038D, those final regulations will modify the effective/applicability date of Prop. Reg. §1.6038D-6. Reporting by domestic entities of interests in specified foreign financial assets will not be required before the date specified by final regulations, which will not be earlier than taxable years beginning after December 31, 2012. The principal author of this notice is Joseph S. Henderson of the Office of Associate Chief Counsel (International). For further information about this notice, contact Mr. Henderson at (202) 622-3840 (not a toll-free call).


Types of Foreign Assets and Whether They are Reportable on Form 8938

Types of Foreign Assets and Whether They are Reportable on Form 8938

Financial (deposit and custodial) accounts held at foreign financial institutions

Yes

Financial account held at a foreign branch of a U.S. financial institution

No

Financial account held at a U.S. branch of a foreign financial institution

No

Foreign financial account or asset for which you have signature authority

No, unless any income, gains, losses, deductions, credits, gross proceeds, or distributions from holding or disposing of the account or asset are or would be required to be reported, included, or otherwise reflected on your income tax return

Foreign stock or securities held in a financial account at a foreign financial institution

The account itself is subject to reporting, but the contents of the account do not have to be separately reported

Foreign stock or securities not held in a financial account

Yes

Foreign partnership interests Yes

Indirect interests in foreign financial assets through an entity

No

Foreign mutual funds Yes

Domestic mutual fund investing in foreign stocks and securities

No

Foreign accounts and foreign non-account investment assets held by foreign or domestic grantor trust for which you are the grantor

Yes, as to both foreign accounts and foreign non-account investment assets

Foreign-issued life insurance or annuity contract with a cash-value

Yes

Foreign hedge funds and foreign private equity funds

Yes

Foreign real estate held directly No

Foreign real estate held through a No, but the foreign entity itself is a specified foreign


foreign entity financial asset and its maximum value includes the value of the real estate

Foreign currency held directly No

Precious Metals held directly No

Personal property, held directly, such as art, antiques, jewelry, cars and other collectibles

No

‘Social Security’- type program benefits provided by a foreign government

No

Comparison of Form 8938 and FBAR Requirements The new Form 8938 filing requirement does not replace or otherwise affect a taxpayer’s obligation to file FinCEN Form 114 (Report of Foreign Bank and Financial Accounts). Individuals must file each form for which they meet the relevant reporting threshold.

Form 8938, Statement of Specified

Foreign Financial Assets

FinCEN Form 114, Report of Foreign Bank and Financial

Accounts (FBAR)

Who Must File?

Specified individuals, which include U.S citizens, resident aliens, and certain non-resident aliens that have an interest in specified foreign financial assets and meet the reporting threshold

U.S. persons, which include U.S. citizens, resident aliens, trusts, estates, and domestic entities that have an interest in foreign financial accounts and meet the reporting threshold

Does the United States include U.S. territories?

No Yes, resident aliens of U.S territories and U.S. territory entities are subject to FBAR reporting

Reporting Threshold (Total Value of Assets)

$50,000 on the last day of the tax year or $75,000 at any time during the tax year (higher threshold amounts apply to married individuals filing jointly and individuals living abroad)

$10,000 at any time during the calendar year

When do you have an interest in an account or

asset?

If any income, gains, losses, deductions, credits, gross proceeds, or distributions from holding or disposing of the account or asset are

Financial interest: you are the owner of record or holder of legal title; the owner of record or holder of legal title is your agent or representative; you





Accounts (FBAR) or would be required to be reported, included, or otherwise reflected on your income tax return

have a sufficient interest in the entity that is the owner of record or holder of legal title.

Signature authority: you have authority to control the disposition of the assets in the account by direct communication with the financial institution maintaining the account.

See instructions for further details.

What is Reported?

Maximum value of specified foreign financial assets, which include financial accounts with foreign financial institutions and certain other foreign non-account investment assets

Maximum value of financial accounts maintained by a financial institution physically located in a foreign country

How are maximum account or asset values

determined and reported?

Fair market value in U.S. dollars in accord with the Form 8938 instructions for each account and asset reported

Convert to U.S. dollars using the end of the taxable year exchange rate and report in U.S. dollars.

Use periodic account statements to determine the maximum value in the currency of the account.

Convert to U.S. dollars using the end of the calendar year exchange rate and report in U.S. dollars.

When Due? By due date, including extension, if any, for income tax return

Received by June 30 (no extensions of time granted)

Where to File?

File with income tax return pursuant to instructions for filing the return

File electronically through FinCENs BSA E-Filing System. The FBAR is not filed with a federal tax return.

Penalties

Up to $10,000 for failure to disclose and an additional $10,000 for each 30 days of non-filing after IRS notice of a failure to disclose, for a potential maximum penalty of $60,000; criminal penalties may also apply

If non-willful, up to $10,000; if willful, up to the greater of $100,000 or 50 percent of account balances; criminal penalties may also apply

Types of Foreign Assets and Whether They are Reportable

Financial (deposit and custodial) accounts held

at foreign financial institutions

Yes Yes

Financial account held at a foreign branch of a

U.S. financial institution

No Yes





Accounts (FBAR)

Financial account held at a U.S. branch of a foreign financial

institution

No No

Foreign financial account for which you

have signature authority

No, unless you otherwise have an interest in the account as described above

Yes, subject to exceptions

Foreign stock or securities held in a

financial account at a foreign financial

institution



Foreign stock or securities not held in a

financial account

Yes No

Foreign partnership interests

Yes No

Indirect interests in foreign financial assets

through an entity

No Yes, if sufficient ownership or beneficial interest (i.e., a greater than 50 percent interest) in the entity. See instructions for further detail.

Foreign mutual funds Yes Yes

Domestic mutual fund investing in foreign

stocks and securities

No No

Foreign accounts and foreign non-account

investment assets held by foreign or domestic grantor trust for which

you are the grantor

Yes, as to both foreign accounts and foreign non-account investment assets

Yes, as to foreign accounts

Foreign-issued life insurance or annuity contract with a cash-

value

Yes Yes

Foreign hedge funds and foreign private equity

funds

Yes No

Foreign real estate held No No





Accounts (FBAR) directly

Foreign real estate held through a foreign entity

No, but the foreign entity itself is a specified foreign financial asset and its maximum value includes the value of the real estate

No

Foreign currency held directly

No No

Precious Metals held directly

No No

Personal property, held directly, such as art,

antiques, jewelry, cars and other collectibles

No No

‘Social Security’- type program benefits

provided by a foreign government

No No

Page Last Reviewed or Updated: 20-Nov-2013


FATCA Information for U.S. Financial Institutions and Entities U.S. financial institutions (USFIs) and other types of U.S. withholding agents are required to withhold 30% on certain U.S. source payments made to foreign entities, if they are unable to document such entities for purposes of FATCA. USFIs and U.S. withholding agents must also report to the IRS information about certain non-financial foreign entities with substantial U.S. owners. USFIs are also eligible to submit a FATCA Registration application via the FATCA Registration Website for the following reasons: A USFI with a foreign branch in a Model 1 IGA jurisdiction to obtain a GIIN for the branch. A USFI with a foreign branch that is a qualifying intermediary (QI) to renew the branch’s QI agreement. A USFI may register as a sponsoring entity for FFIs and agree to perform, on behalf of the FFI, all the FATCA activities that the FFI otherwise would have to do. A USFI may register as a Lead FI to manage the FATCA registration process for members of its Expanded Affiliated Group of FFIs.


FATCA Information for Foreign Financial Institutions and Entities

Alert: There have been updates to the FATCA Registration System as of December 8, 2013. A FATCA Registration Update Summary is available.

ALERT: Notice 2013-69: FFI agreement for Participating FFI and Reporting Model 2 FFI.

NEW International Data Exchange Under FATCA, to avoid being withheld upon, foreign financial institutions (FFIs) may register with the IRS and agree to report to the IRS certain information about their U.S. accounts, including accounts of certain foreign entities with substantial U.S. owners

FFIs that enter into an agreement with the IRS to report on their account holders may be required to withhold 30% on certain payments to foreign payees if such payees do not comply with FATCA

The FATCA regulations exempt many categories of FFIs from the requirement to register and report, including

Most governmental entities

Most non-profit organizations

Certain small, local financial institutions

Certain retirement entities

FFIs include, but are not limited to:

Depository institutions (for example, banks)

Custodial institutions (for example, mutual funds)

Investment entities (for example, hedge funds or private equity funds)

Certain types of insurance companies that have cash value products or annuities

Unless otherwise exempt, FFIs that do not both register and agree to report face a 30% withholding tax on certain U.S.-source payments made to them.

An FFI that registers on the “FATCA Registration Website” (“Website”), upon approval, will receive a Global Intermediary Identification Number (GIIN) from the IRS, unless the FFI is treated as a Limited FFI.

An FFI may also register on paper, but this is not recommended

The Website is a secure online web application that provides paperless FATCA registration accessible from anywhere in the world, 24 hours a day. Visit the FATCA Registration Resources page for registration instructions, user guide, frequently asked questions and other helpful tools.

IRS will publish a list of registered and approved FFIs and their GIINs every month. An FFI List search and download tool will also be available to search this list by FI name, GIIN or country.

FATCA FFI List Resources Page

An FFI uses its GIIN to identify that it is registered and approved to:


Withholding agents and

The IRS

Withholding agents may rely on the IRS published list or FFI list search and download tool to verify an FFI’s GIIN and not withhold on payments made to the FFI.

The treatment of an FFI established in a jurisdiction with an intergovernmental agreement treated as in effect may differ from the treatment described above. An FFI in such a jurisdiction should refer to the applicable intergovernmental agreement.

REMINDER: For withholdable payments made prior to January 1, 2015, verification of a GIIN is not required with respect to payees that are reporting Model 1 FFIs. As a result, reporting Model 1 FFIs will have additional time beyond July 1, 2014 to register and obtain a GIIN in order to ensure that they are included on the IRS FFI list before January 1, 2015.

Page Last Reviewed or Updated: 31-Dec-2013


Revised Timeline and Other Guidance Regarding the Implementation of FATCA Notice 2013-43 I. PURPOSE This notice provides: (i) revised timelines for implementation of the requirements of sections 1471 through 1474 of the Internal Revenue Code (Code), commonly referred to as the Foreign Account Tax Compliance Act, or FATCA; and (ii) additional guidance concerning the treatment of financial institutions located in jurisdictions that have signed intergovernmental agreements for the implementation of FATCA (IGAs) but have not yet brought those IGAs into force. The Department of the Treasury (Treasury) and the Internal Revenue Service (IRS) intend to amend the regulations under sections 1471 through 1474 to adopt these rules. Prior to the issuance of those amendments, taxpayers may rely on the provisions of this notice regarding expected amendments to the regulations. II. BACKGROUND A. FATCA Regulations On March 18, 2010, the Hiring Incentives to Restore Employment Act of 2010, Pub. L. 111-147 (H.R. 2847), added chapter 4 (sections 1471 through 1474) to Subtitle A of the Code. Chapter 4 requires withholding agents to withhold 30 percent of certain payments to a foreign financial institution (FFI) unless the FFI has entered into an agreement (FFI agreement) with the IRS to, among other things, report certain information with respect to U.S. accounts. Chapter 4 also imposes on withholding agents certain withholding, documentation, and reporting requirements with respect to certain payments made to certain non-financial foreign entities (NFFEs). On February 15, 2012, Treasury and the IRS published proposed regulations under chapter 4 in the Federal Register (REG-121647-10, 77 Fed. Reg. 9022) (proposed regulations). On January 17, 2013, Treasury and the IRS published final regulations under chapter 4 (TD 9610, 78 Fed. Reg. 5873) (final regulations). The final regulations provided for a phased implementation of the requirements of FATCA, beginning on January 1, 2014, and continuing through 2017. In particular, the final regulations provided that withholding agents (including participating FFIs (PFFIs), qualified intermediaries (QIs) that assume withholding responsibility, withholding foreign partnerships (WPs), and withholding foreign trusts (WTs)) would be required to begin withholding with respect to withholdable payments made after December 31, 2013 (with an exception for “grandfathered obligations” outstanding on January 1, 2014, and associated collateral). Due diligence for documenting payees and account holders by U.S. withholding agents and PFFIs would be phased in during 2014 and 2015.


Annual reporting by PFFIs would be phased in starting in 2015 (with respect to information related to the 2013 and 2014 calendar years), with reporting of the full scope of FATCA information required beginning in 2017. B. Model IGAs On July 26, 2012, Treasury released a model (Model 1) for bilateral agreements with other jurisdictions (in both reciprocal and nonreciprocal versions) under which FFIs (reporting Model 1 FFIs) would satisfy their chapter 4 requirements by reporting information about U.S. accounts to their respective tax authorities, followed by the automatic exchange of that information on a government-to-government basis with the United States. On November 14, 2012, Treasury released a second model agreement (Model 2), under which FFIs (reporting Model 2 FFIs) would report specified information directly to the IRS in a manner consistent with the final regulations, supplemented by government-to-government exchange of information on request. Treasury has concluded a number of bilateral IGAs based on the model agreements (Model 1 IGAs and Model 2 IGAs, respectively). Treasury has periodically updated the model IGAs since their initial release, including an update to both model IGAs on May 9, 2013, to incorporate certain modifications arrived at through intergovernmental discussions, as well as modifications to the due diligence procedures to reflect improvements adopted in the final regulations following the initial release of the model IGAs. The model IGAs outline time frames for FFIs in jurisdictions with IGAs in force (partner jurisdictions) to complete the necessary due diligence to identify U.S. accounts and to perform reporting on U.S. accounts that are identified. The timelines and other provisions contained in the model IGAs interact with the final regulations in various ways. The model IGAs, and all IGAs that have been concluded to date, contain a provision, colloquially referred to as the “most-favored nation” provision, providing that, with respect to certain terms of the IGA, including the due diligence rules applicable to reporting Model 1 FFIs and reporting Model 2 FFIs, a partner jurisdiction is entitled to the benefit of any more favorable provision agreed to in a comparable IGA with another partner jurisdiction, subject to certain conditions. Model 1 IGAs and Model 2 IGAs also contain a coordination provision providing that a partner jurisdiction may permit its FFIs to use a definition in the relevant U.S. Treasury Regulations in lieu of a corresponding definition in the IGA, provided that such application would not frustrate the purposes of the IGA. With respect to the due diligence procedures, Model 1 IGAs and Model 2 IGAs provide that a partner jurisdiction may permit its FFIs to apply the due diligence procedures described in the relevant U.S. Treasury Regulations in lieu of the due diligence procedures in the IGA to establish the status of account holders and payees. In addition, paragraph 6 of Article 4 of the Model 1 IGA coordinates the time by which the parties must obtain and exchange information with the time by which PFFIs must report similar information to the IRS under the relevant U.S. Treasury Regulations.


C. Registration Process In the preamble to the final regulations, Treasury and the IRS announced their intent to create a FATCA registration website, which would serve as the primary way for FFIs to interact with the IRS to complete the required registration, agreements, and certifications. The preamble stated that the FATCA registration website would be accessible to FFIs no later than July 15, 2013. After approval of its registration, each PFFI and registered deemed-compliant FFI would be assigned a global intermediary identification number (GIIN), which would be used both for reporting purposes and to identify the FFI’s status to withholding agents. The preamble provided that the IRS would electronically post the first list of PFFIs and registered deemed-compliant FFIs (IRS FFI List) on December 2, 2013, and would update the list on a monthly basis. To ensure inclusion on the December 2013 IRS FFI List, FFIs would need to register by October 25, 2013. D. Modification of Phased Timeline for Implementation Comments have indicated that certain elements of the phased timeline for the implementation of FATCA present practical problems for both U.S. withholding agents and FFIs. In addition, while comments from FFIs overwhelmingly supported the development of IGAs as a solution to the legal conflicts that might otherwise impede compliance with FATCA and as a more effective and efficient way to implement cross-border tax information reporting, some comments noted that, in the short term, continued uncertainty about whether an IGA will be in effect in a particular jurisdiction hinders the ability of FFIs and withholding agents to complete due diligence and other implementation procedures. In consideration of these comments, and to allow for a more orderly implementation of FATCA, Treasury and the IRS intend to amend the final regulations to postpone by six months the start of FATCA withholding, and to make corresponding adjustments to various other time frames provided in the final regulations, as described in section III below. In addition, as described in section IV below, Treasury and the IRS intend to provide a list of jurisdictions that will be treated as having in effect an IGA, even though that IGA may not have entered into force as of July 1, 2014. Unless otherwise defined, terms used in this notice have the meanings set 6 forth in the final regulations. III. REVISED FATCA IMPLEMENTATION TIMELINE


A. Timeline for Withholding Withholding agents generally will be required to begin withholding on withholdable payments made after June 30, 2014, to payees that are FFIs or NFFEs with respect to obligations that are not grandfathered obligations, unless the payments can be reliably associated with documentation on which the withholding agent can rely to treat the payments as exempt from withholding. The definition of grandfathered obligation will be revised to include obligations outstanding on July 1, 2014 (and associated collateral). This notice does not affect the timing provided in the final regulations for withholding on gross proceeds, passthru payments, and payments of U.S. source FDAP with respect to offshore obligations by persons not acting in an intermediary capacity. B. Timeline for Implementing New Account Opening Procedures and the Definition of Preexisting Obligations Withholding agents generally will be required to implement new account opening procedures by July 1, 2014, or, in the case of a PFFI, by the later of July 1, 2014 or the effective date of its FFI agreement. Accordingly, the definition of the term “preexisting obligation” will be modified to mean: With respect to a withholding agent other than a PFFI or a registered deemed-compliant FFI: any account, instrument, or contract maintained, executed, or issued by the withholding agent that is outstanding on June 30, 2014; With respect to a PFFI: any account, instrument, or contract maintained, executed, or issued by the PFFI that is outstanding on the effective date of the FFI agreement; and With respect to a registered deemed-compliant FFI: any account, instrument, or contract maintained, executed or issued by the FFI prior to the later of July 1, 2014, or the date on which the FFI registers as a deemed-compliant FFI and receives a GIIN. Treasury intends to include a similar change to the definition of the term “Preexisting Account” in both model IGAs. Thus, it is expected that future IGAs will define the term “Preexisting Account” to mean a Financial Account maintained as of June 30, 2014. For IGAs in force that contain the previous definition of the term “Preexisting Account,” the partner jurisdiction will be permitted under the coordination provision of the IGA to permit its FFIs to substitute the definition of the term “preexisting account” from the amended final regulations for the definition of the term “Preexisting Account” in the IGA. For IGAs concluded before the coordination provision was added, the coordination provision will apply through the operation of the most-favored nation provision once an IGA containing the coordination provision is in force.


C. Transition Rules for Completing Due Diligence on Preexisting Obligations The FFI Agreement of a PFFI that registers and receives a GIIN from the IRS on or before June 30, 2014, will have an effective date of June 30, 2014, effectively resulting in a six-month postponement of the deadlines for completing due diligence on preexisting obligations. For withholding agents other than PFFIs, the deadlines for completing due diligence on preexisting obligations will be postponed by six months. Thus, for example, a withholding agent other than a PFFI will be required to document payees that are prima facie FFIs by December 31, 2014, instead of by June 30, 2014. Account balance or value will be measured initially as of June 30, 2014, for purposes of determining whether an account is exempt from review

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