U.S. Treasury extended until July 1, 2014 the enforcement of the new law, Foreign Account Tax Compliance Act (“FATCA”) to give foreign banks more time to comply.
FATCA requires foreign banks, insurance companies and investment funds to send the IRS information about American’s offshore accounts worth more than $50,000.
Robert Stack, U.S. Treasury deputy assistant for international tax affairs said, “We are providing an additional 6 months to complete agreements with countries and jurisdictions around the globe.”
According to Reuter’s:
1) “Foreign banks that do not that do not comply with the law can be effectively frozen out of U.S. capital markets because of a 30-percent withholding tax on U.S. source income.”
2) “FATCA may be in conflict with home-country banking laws that shield account holder information.”
3) “To avert legal conflicts, the U.S. Treasury and IRS have been working on Inter-governmental Agreements (IGA’s) that will let the home-country governments of foreign banks act as an information disclosing intermediaries to deal with the IRS.
The U.S. has finalized IGA’s with 8 countries (dozens more are in negotiations): Germany, Spain, Norway, Switzerland, Ireland, Mexico, Denmark, and United Kingdom.
The IGA’s do not need U.S. congress approval but many foreign governments must approve them.
According to the 7/12/13 Treasury notice: IRS issued Notice 2013-43
1) A new registration website for banks to sign up with the IRS opens 9/19/13
2) Businesses must register by 4/25/14 to avoid FATCA penalties starting 7/1/14.