Foreign Account Tax Compliance Act (FATCA) Resource Center


FATCA stands for the "Foreign Account Tax Compliance Act."
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On March 18, 2010, the Hiring Incentives to Restore Employment (HIRE) Act of 2010 was enacted into law. The Act added a new chapter 4 (sections 1471 - 1474) to the Internal Revenue Code. Chapter 4 expands the information reporting requirements imposed on foreign financial institutions (FFIs). These rules are commonly referred to as the Foreign Account Tax Compliance Act rules or "FATCA." The FATCA provisions impose a 30 percent withholding tax on payments to a foreign financial institution (FFI) of U.S. source interest, dividends, rents, salaries, or gross proceeds from the sale of U.S. assets. The tax can be avoided, but only if the FFI enters into an agreement with the IRS to comply with information reporting requirements with respect to U.S. accounts and the FFI agrees to withhold on certain payments to non-participating FFIs and individual account holders.  

FATCA is a key component of the federal government's push for heightened tax compliance among U.S. taxpayers with foreign accounts. FATCA was implemented to ensure the U.S. government has the necessary tools to effectively to determine the ownership of U.S. assets in foreign accounts. On February 8, 2012, the IRS issued proposed regulations to implement the new law. The proposed regulations were nearly 400 pages long and substantially modified preliminary IRS guidance on FATCA. At the time, it was understood that a draft FFI agreement would be finalized together with the appropriate reporting forms later in 2012. 

Later in the 2012, the U.S. Department of Treasury released several model intergovernmental agreements (IGAs) to facilitate FATCA compliance in certain countries. Under the "Model I" IGA approach, FFIs based in the signatory country are not required to sign an FFI agreement and report directly to the IRS. Instead, the Model I country promulgates its own rules mandating that in-country FFIs should report to the local revenue authority, and the revenue authority agrees to share relevant information with the IRS. Under the "Model II" IGA approach, in-country FFIs are still required to sign FFI agreements with the IRS, but they are relieved of certain FATCA requirements, such as the obligation to close the accounts of recalcitrant account holders. More than 30 countries have signed Intergovernmental Agreements (IGAs) with the U.S. and many others have reached "agreements in substance" and are being treated by the Treasury as having an IGA in effect. 

On January 17, 2013 the Treasury Department issued final regulations under FATCA. The final regulations are more than 500 pages long and include many updates and revisions to the proposed rules. The final rules include delayed implementation dates for U.S. withholding agents, extended grandfather protections for certain securities, and announce Treasury's intention to re-propose regulations that will govern FATCA withholding on gross proceeds.

On July 12, 2013 the Treasury Department and the Internal Revenue Service announced a six month extension to FATCA withholding and account due diligence requirements to July 1, 2014.

On May 2, 2014, the Treasury Department announced that they would provide targeted FATCA relief by implementing a transition period for calendar years 2014 and 2015, and addressing other problems.  

According to IRS Notice 2014-33:

  • Accounts opened prior to January 1, 2015, except for accounts opened by individuals, are considered preexisting obligations;
  • Direct account holders will continue to be considered documented prior to July 1, 2014 for nonresident alien and backup withholding purposes, even if the  account documentation is required to be renewed on or after that date, as long as the withholding agent does not have a reason to know;
  • The requirements for treatment as a "limited FFI" or "limited Branch" have been relaxed; and
  • The range of "reasonable explanations" of accepted foreign status under the due diligence process has been expanded.

On August 19, 2013, the IRS opened its online FATCA registration system (the FATCA Portal) to allow financial institutions to register with the IRS to meet their FATCA obligations. Information entered into the portal prior to January 1, 2014 will not be treated as a final submission. FFIs may finalize their registration information beginning on January 1, 2014. May 5, 2014 is the final day to register for guaranteed inclusion on the first registered FFI list. The IRS published the first FFI list on June 2, 2014 and will update it monthly thereafter.


Date   Event  

Mar. 18, 2010

HIRE Act enacted into law- adding FATCA to Internal Revenue Code

Feb. 8, 2012

IRS issued proposed regulations to implement the new law

Mar. 8, 2012

RFP Bidders Conference

Jan. 17, 2013

Treasury Department issued final regulations under FATCA

Aug. 19, 2013

FFI registration opens; however, information entered into the portal prior to January 1, 2014 will not be treated as a final submission.   

Jan. 1, 2014

Financial institutions may now finalize and submit registration.

Jun. 2, 2014

IRS will publish the FFI list

Jul. 1, 2014

Begin FATCA withholding

January 1, 2015

Begin withholding on non-compliant banks and broker-dealers in non-IGA jurisdictions.


FATCA is the most comprehensive statute ever passed to enhance compliance by Americans with U.S. tax laws through information reporting and withholding. Virtually the entire burden for implementing the new law falls on U.S. and foreign financial services firms. The final FATCA rules are significantly impacting the systems and operations of both U.S. and non-U.S. companies. They will require companies to modify their internal systems, control frameworks, processes and procedures on or before key FATCA implementation dates go into effect. 

SIFMA shares the objective of Congress and Treasury to improve offshore tax compliance. SIFMA has submitted extensive comments to assist the Department of the Treasury and the IRS in crafting regulations that are effective in accomplishing FATCA's goals that are commercially viable, and that will not unnecessarily disrupt the operation of the financial markets. SIFMA thanks the Treasury for the latest notice implementing a transition period which will allow financial institutions to comply more effectively while minimizing unnecessary cost burdens and reducing potential harm to the U.S. economy in the long-run.  This new guidance will also allow extra time for more economies to sign intergovernmental agreements, to make the official transition to FATCA in 2015 more comprehensive and with fewer penalties.



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