Treasury, IRS Issue Proposed Regulations for FATCA Implementation; U.S. and 5 European Countries Agree to Cooperate in Fighting Tax Evasion

The Treasury Department and the Internal Revenue Service (IRS) have issued proposed regulations for the next major phase of implementing the Foreign Account Tax Compliance Act (FATCA).

Additionally, the United States, France, Germany, Italy, Spain and Britain issued a joint statement saying they wanted “to intensify their cooperation in combating international tax evasion.” The U.S. agreed to “reciprocate in collecting and exchanging” information about U.S. accounts held by residents of those countries.

Enacted by Congress in 2010, FATCA targets non-compliance by U.S. taxpayers using foreign accounts. The proposed regulations are in response to sharp criticisms FATCA received from foreign financial institutions (FFI) regarding the administrative burdens and expenses.

The proposed regulations include:

In order to avoid being withheld upon under FATCA, a participating FFI will have to enter into an agreement with the IRS to:

  • Identify U.S. accounts,
  • Report certain information to the IRS regarding U.S. accounts,
  • Verify its compliance with its obligations pursuant to the agreement, and
  • Ensure that a 30-percent tax on certain payments of U.S. source income is withheld when paid to non-participating FFIs and account holders who are unwilling to provide the required information.

Registration will take place through an online system which will become available by Jan. 1, 2013. FFIs that do not register and enter into an agreement with the IRS will be subject to withholding on certain types of payments relating to U.S. investments.

Submitting Comments

Written or electronic comments must be received by April 30, 2012. Requests to speak and outlines of topics to be discussed at the public hearing scheduled for May 15, 2012, at 10 a.m. must be received by May 1, 2012.

Send submissions to:

CC:PA:LPD:PR (REG-121647-10)
Room 5205
Internal Revenue Service
PO Box 7604
Ben Franklin Station, Washington, D.C. 20044

See Also

Proposed Regulations