The Internal Revenue Service (IRS), the US tax agency, on Monday announced the launch of an online system that foreign financial institutions (FFIs) can use to register with the agency to meet their obligations under the US Foreign Account Tax Compliance Act (FATCA).
The system allows institutions that must register with the IRS to create an account and provide the required information. The system will also allow financial institutions to provide required information for their branches of operation and other members of expanded affiliate groups of which the financial institution is the lead organisation.
FFIs include, but are not limited to:
- Depository institutions, such as banks;
- Custodial institutions, such as mutual funds;
- Investment entities, such as hedge funds; and
- Certain insurance companies that have cash-value products or annuities.
However, the regulations exempt several types of FFIs from the registration and reporting requirements. These FFIs include most governmental entities, most non-profit organisations, and certain small, local financial institutions and retirement entities. Unless they are exempt, FFIs that do not both register and agree to report face a 30% withholding tax on certain US-source payments made to them.
In addition to establishing an account, the IRS says the system will allow financial institutions to:
- Customise home pages to manage accounts;
- Designate points of contact to handle registrations;
- Oversee member and/or branch information; and
- Receive automatic notifications of status changes.
The IRS says it expects financial institutions to finalise their registration information starting in January 2014, after which they will receive a notice of registration acceptance and a global intermediary identification number.
The IRS recently delayed implementation of the FATCA reporting and withholding requirements for six months, and they will now start July 1st 2014.
—Alistair Nevius (email@example.com) is CGMA Magazine’s editor-in-chief, tax.