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IRS Delays FATCA Implementation by Six Months

On July 12, 2013, the U.S. Internal Revenue Service (“IRS”) issued Notice 2013-43, which postpones by six months, from January 1, 2014 to July 1, 2014, the implementation timeline for the Foreign Account Tax Compliance Act (“FATCA”). Foreign jurisdictions, such as the Cayman Islands, which are currently negotiating intergovernmental agreements (“IGAs”) will now have more time to finalize these agreements prior to the FATCA withholding deadline.

The FATCA registration website is now projected to be accessible to Foreign financial institutions (“FFIs”) beginning on August 19, 2013 (extended from the original expected date of July 15, 2013), and FFIs will not be required to register with the IRS or, where applicable, enter into an FFI agreement with the IRS until June 30, 2014. The IRS will publish the first list of global intermediary identification numbers (“GIINs”) by June 2, 2014 (extended from December 2, 2013), and will update this list on a monthly basis thereafter. An FFI’s registration must now be finalized by April 25, 2014 (rather than October 25, 2013) to ensure inclusion on the first IRS FFI List.

In addition, withholding under FATCA will not be required for U.S.-source income payments made prior to July 1, 2014. The definition of “grandfathered obligations” which are exempted from such withholding has also been revised to now include obligations outstanding on July 1, 2014. The IRS did not delay the date that withholding begins on gross proceeds and foreign pass-thru payments, as the effective date for this withholding remains January 1, 2017. The IRS also extended the dates related to FATCA’s due diligence by six months, and the March 31, 2015 due date for filing the first information report will only be required for reporting information from the 2014 calendar year (rather than the previously required 2013 and 2014 years).

Withholding documents, such as IRS Forms W-8BEN and other Forms W-8, that would otherwise have expired on December 31, 2013, will now be valid until June 30, 2014, unless a change in circumstances occurs that would otherwise have caused such certificates or documentary evidence to become incorrect or unreliable.

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GlobalNote™ is a newsletter of Tannenbaum Helpern Syracuse & Hirschtritt LLP’s Investment Management practice. It provides in-depth strategic perspectives on legal developments and market trends impacting hedge funds, private equity funds, investment management, financial services, capital markets and financial services related transactions and matters. To subscribe for the newsletter, send email to thsh@thsh.com.

07.01.2013  |  PUBLICATION: GlobalNote  |  TOPICS: Investment Management, Tax  |  INDUSTRIES: Private Investment Funds

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