About FATCA  
  8 FATCA Facts  
  Comment Letters  
  Final Legislation  
  Evolution of FATCA  
  FATCA & MNCs  
  FATCA, U.S. Individuals & Foreign Trusts  
  Client Letters  
  BSM & CTI Solutions  


FATCA refers to a major revamp of the U.S. withholding tax system. It imposes a new 30% withholding tax on certain payments made to foreign financial institutions (“FFIs”) and non-financial foreign entities (“NFFEs”) that refuse to identify U.S. account holders and investors. It does not matter whether the U.S. person invests in U.S. securities or receives the U.S. source income directly. “Withholdable payments” that are subject to the 30% tax include both U.S. source income (e.g., interest or dividends paid by a U.S. corporation) and the gross proceeds from the sale of securities that theoretically could generate U.S. source income.

FFIs and NFFEs can avoid withholding, but only by following disclosure rules. FFIs must enter into an agreement with the IRS to identify their U.S. account holders, follow due diligence rules, and withhold on “recalcitrant account holders.” NFFEs must disclose any U.S. persons who own more than 10% of the NFFE, directly or indirectly.

The new rules affect not just the financial industry, but all withholding agents, including U.S operating companies. Failure to comply with the new rules may give rise to significant withholding tax liability on withholding agents.

Even when FFIs and NFFEs fully disclose their U.S. account holders and owners, the longstanding NRA withholding rules under section 1441 of the Internal Revenue Code continue to apply. Withholding agents will still be required to comply with all existing documentation, withholding and reporting rules. FATCA is simply an overlay on the NRA and Form 1099 rules.

FATCA gets its name from the Foreign Account Tax Compliance Act, where most of its provisions originated. Those provisions are now Title V of the Hiring Incentives to Restore Employment (“HIRE”) Act.

FATCA goes into effect on January 1, 2013. The IRS has stated that certain critical dates under FATCA will be phased in over several years. See the new implementation schedule.


  © Copyright 2015. Burt, Staples & Maner, LLP
Site Designed By: DC Web Designers, a Washington DC Web Design Company