The U.S. Treasury and IRS said last Friday that they would extend the withholding and due diligence requirements of the Foreign Account Tax Compliance Act for six months after numerous countries expressed interest in the measure.
FATCA, which was enacted by Congress in 2010, targets U.S. taxpayers using foreign accounts and implements a global framework for combating tax evasion. The law requires U.S. financial institutions to withhold a portion of payments to foreign institutions that refuse to identify and report information on American accountholders.
The extension to July 1, 2014, will be provided to allow more time to complete agreements with foreign jurisdictions and to allow foreign institutions more time to comply with the requirements.
“Given the groundswell of international interest in FATCA, we are providing an additional six months to complete agreements with countries and jurisdictions across the globe, before withholding begins,” Robert B. Stack, the Treasury deputy assistant secretary for international tax affairs, said. “The high volume of international participation in this effort represents a quintessential race to the top. Every additional country we bring on board means we are one step closer to winning the fight against offshore tax evasion.”
The Treasury has developed a number of intergovernmental agreements that rely on international cooperation to facilitate the exchange of FATCA information—many participants in the global community are considering using the IGAs to establish an international standard for sharing tax information.
With the extension of the compliance date, the first FATCA report will be due in 2015 and will include information on accounts maintained during 2014. Other FATCA deadlines remain unchanged.