IRS Issues Final FFI Agreement under FATCA

On December 26th, the U.S. Internal Revenue Service published the final version of the FFI Agreement under FATCA to which foreign financial institutions ("FFIs") (other than those located in Model 1 IGA countries) must agree by July 1, 2014, in order to be considered compliant with FATCA. FFIs that do not register with the IRS and agree to an FFI Agreement will be subject to a 30% withholding tax on all payments of U.S. source dividends, interest and other fixed and similar passive types of income commencing on July 1, 2014. A draft version of the FFI Agreement was issued by the IRS in October 2013 as part of Notice 2013-69. The final version of the FFI Agreement, which is contained in Revenue Procedure 2014-13, linked below, reflects only a few substantive changes from the draft version. Most importantly, the final version permits FFIs in Model 2 IGA countries, such as Switzerland, Japan, and Bermuda, to elect to utilize for a two-year period the due diligence procedures set forth in the FATCA regulations, rather than in Annex I to the Model 2 IGA.

Revenue Procedure 2014-13 also indicates that the IRS and Treasury Department will issue new Temporary Regulations under FATCA that will provide further clarification and modifications to the Final FATCA Regulations that were issued in January 2013. An additional set of Temporary Regulations will be issued coordinating the provisions of the FATCA regulations and the FFI Agreement with the existing income tax withholding and reporting regulations. The IRS says that it expects these Temporary Regulations to be issued in January 2014.

See: FFI Agreement.Related news: IRS Finalizes Schema for Automatically Exchanging FATCA Data with IGA Jurisdiction and Posts Frequently Asked Questions on FFI Lists to Web Site (December 19, 2013); SIFMA Submits Comments Regarding FFI Guidance in Notice 2013-69 (December 18, 2013).See generally: Cabinet FATCA Materials.For more information please contact Daniel Mulcahy or Mark Howe.