USA: FATCA Starts To Become Visible For Multinational Companies - Part 1
29 November 2013
Posted by: Author: Pillsbury Winthrop Shaw Pittman LLP
Author: Pillsbury Winthrop Shaw Pittman LLP (Lexology)
Enacted in 2010, the U.S. Foreign Account Tax Compliance Act (FATCA)
mandates U.S. citizens and green card holders to report their non-U.S.
financial accounts plus related investment earnings to the Internal
Revenue Service. The reporting structure consists of two related
strands, individual-level reporting and program-level reporting. The
individual-level reporting strand requires U.S. persons to report their
non-U.S. accounts as part of their federal income tax filing while the
program-level reporting requires foreign financial institutions that
operate financial accounts for U.S. persons to report on these annually
to the IRS.
In part one of this two-part series, James Klein, New York-based senior
counsel in Pillsbury’s executive compensation and benefits and tax
practices, provides an overview of the program-level reporting issues
that multinational corporations must manage with regard to their
non-U.S. long-term benefits plans.
FATCA affects all multinational companies worldwide, regardless of
where they are headquartered. For any non-U.S. long-term benefits
program that is not FATCA-exempt, a company will need to decide whether
to register the program with the IRS. It is chooses to register, it will
need to overhaul its recordkeeping and on-boarding systems. If it
chooses not to register, it will be subject to a new, punitive 30
percent withholding tax on its U.S.-source investment income.
Since 2012, significant changes have impacted FATCA’s implementation methodology and/or implementation timing, including:
This article first appeared in lexology.com.
Inter-Governmental Agreements released by the IRS in mid-2012 to work
with countries in which the local law precludes a financial institution
from reporting account information directly to the IRS.
Final FATCA regulations released in January 2013, which differ from
the proposed regulations and describe exemptions that are available for
non-U.S. benefits programs.