20 February 2014: The Treasury Department and IRS announced the release of a package of regulations to implement provisions under the Foreign Account Tax Compliance Act (FATCA).
The package of regulations concerns information reporting by foreign financial institutions (FFIs) and withholding payments to FFIs and other foreign entities; withholding of tax on certain U.S. source income paid to foreign persons; information reporting; and backup withholding on payments made to U.S. persons.
A transmittal Treasury release stated that proposed regulations were also being issued on that day; however, text of the proposed regulations was not made available (this package of regulations was issued in advance of release via the Federal Register).
According to a Treasury “fact sheet” (PDF, 259 KB) the key elements of these regulations include:
The February regulations do not provide a similar exception to reporting under chapter 61 for U.S. payors.
The regulations provide a new, limited exception to reporting under chapter 61 for both U.S. payors and non-U.S. payors that are FFIs required to report under chapter 4 or an applicable IGA with respect to payments that are not subject to withholding under chapter 3 or section 3406 and that are made to an account holder that is a presumed (but not known) U.S. non-exempt recipient. FFIs that are required to report under chapter 4 or an applicable IGA will provide information regarding account holders who are presumed U.S. non-exempt recipients. Moreover, such presumed U.S. non-exempt recipients may not actually be U.S. persons for whom the recipient copy of Form 1099 would be relevant to facilitate voluntary compliance. As a result, reporting under chapter 61 is being eliminated on payments to account holders who are presumed U.S. non-exempt recipients and for whom there is FATCA reporting.
The February regulations provide a new, limited exception from reporting under chapter 61 for U.S. payors acting as stock transfer agents or paying agents of distributions from certain passive foreign investment companies (PFICs) made to U.S. persons. This exception is based, in part, on comments suggesting ways to reduce duplicative reporting with respect to PFIC shareholders. This exception would reduce burden while not significantly impacting taxpayer compliance.
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