Daily Tax Update - January 3, 2017: IRS Issues FATCA Regulations

IRS Issues FATCA Regulations:  Late December 30, the Treasury Department and the IRS issued a series of regulations providing guidance to financial institutions on requirements under the Foreign Account Tax Compliance Act (FATCA).  This regulation package includes:

  • Final and temporary regulations (T.D. 9809) that address information reporting by foreign financial institutions (FFIs) for US accounts and withholding on certain payments made to FFIs and other foreign entities.  These regulations clarify that foreign branches of US banks will be considered US withholding agents and may be treated as FFIs in some cases.
  • Final regulations (T.D. 9808) that finalize temporary regulations issued in March 2014 regarding the withholding of tax on certain US source income paid to foreign persons, information reporting and backup withholding with respect to payments made to certain US persons, and the treatment of portfolio interest paid to nonresident alien individuals and foreign corporations.  
  • Proposed and temporary regulations (REG-134247-16) (T.D. 9808) that revise final regulations regarding the withholding tax on certain US source income paid to foreign persons and requirements for certain claims for refund or credit of income tax made by foreign persons.
  • Proposed and temporary regulations (REG-103477-14) that address the verification and certification of compliance requirements for entities that agree to perform FATCA due diligence, withholding, and reporting requirements on behalf of certain FFIs.

Switzerland Begins Collection of Tax Information:  On January 1, Switzerland began collection of information under the International Convention on the Automatic Exchange of Information (AEOI) developed by the Organization for Economic Cooperation and Development (OECD).  The convention provides for the mutual exchange of information on financial accounts between the almost 100 states that have agreed to the AEOI.  These new rules serve to change the historic “secrecy” of Swiss bank account information and bring Switzerland in line with international standards for exchange of financial information.  The financial data will begin being exchanged with partner states in 2018.