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The United States Department of the Treasury and the Internal Revenue Service (IRS) have announced that foreign jurisdictions that have reached agreement on the terms of intergovernmental agreements (IGAs) under the Foreign Account Tax Compliance Act (FATCA) can be treated as having such agreements in effect until the end of 2014.
This treatment will be available to jurisdictions that have reached agreements in substance prior to July 1, 2014, and that consent to having the status of their agreements disclosed. After December 31, 2014, only signed IGAs will be considered to be in effect.
As an increasing number of jurisdictions reach agreements in substance, the announcement provides foreign financial institutions (FFIs) located in these jurisdictions with the guidance they need prior to the upcoming registration deadlines.
In addition, as part of the effort to facilitate an effective start of FATCA withholding on July 1, 2014, it has also been announced that FFIs will be allowed ten more days to register and ensure that they will be included on the first IRS FFI list, if they submit a complete registration form by May 5, 2014, instead of April 25, 2014, as originally announced. The IRS stated that it can provide this extra time based on its assessment of the performance of its registration system to date.
It was disclosed that, to date, the US has signed 26 IGAs, and the announcement provides that 19 additional jurisdictions will now be treated as having IGAs in effect. That would bring the total number of jurisdictions that are treated as having IGAs in effect to 45.
This list is expected to continue to grow in the coming weeks as additional countries provide consent to having the status of their IGAs disclosed, and additional agreements in substance are reached.
"With 45 countries now considered to have IGAs in effect, and more jurisdictions far along in the process, today's announcement provides crucial clarity for financial institutions as they prepare to comply with FATCA starting on July 1," said Deputy Assistant Secretary for International Tax Affairs Robert Stack.
Congress enacted FATCA in 2010 to target non-compliance by US taxpayers using foreign accounts. It requires US financial institutions to withhold 30 percent of certain payments made to FFIs that do not agree to identify and report information on US account holders. Foreign Governments have two options for complying with FATCA: they can either permit their FFIs to enter into agreements with the IRS, or they can themselves enter into IGAs with the US.
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