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Offshore accounts: FATCA rules delayed

The Foreign Account Tax Compliance Act (FATCA) is an ambitious attempt by the U.S. government to enlist foreign financial institutions and governments as allies in tax collection efforts. Indeed, it is so ambitious that many critics have called it over-reaching - an unprecedented power grab for tax collectors that may have negative consequences for global commerce.

Like it or not, however, the regulatory process for implementing FATCA is well underway. Given the scope of the coming changes, it should not really be too much of a surprise that efforts to adopt the various rules and regulations to fully implement it are running into some delays.

For example, the IRS announced recently that it had postponed several staggered start dates for FATCA compliance. The IRS did not elaborate on this decision, but may people and businesses in the financial industry are relieved at the postponement.

The U.S. Treasury Department is still working on final FATCA rules. But with the delay announced by the IRS, foreign financial institutions will apparently have until January 1, 2017 before they are required to actually withhold U.S. tax from Americans' offshore accounts.

As a result of the delay, these banks and other institutions will also have until January 1, 2014 to put procedures in place to begin the reporting required by FATCA.

Though generally grateful for the FATCA implementation delay, foreign financial institutions are still eager to get more clarity about what exactly will be required of them going forward.

Meanwhile, the Treasury Department continues to work on country-to-country agreements for sharing information about foreign accounts.

Source: "IRS delays key start dates for global tax evasion law," Reuters, 10-24-12

Our firm handles situations similar to those discussed in this post. To learn more about our practice, please visit our offshore accounts page.

1 Comment

I agree that this may have a negative impact on global commerce. There will be lesser companies who will venture businesses abroad because of this. We all need int'l commerce and trading to sustain us with some needs. This move will definitely affect our needs.

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