As we have reported on January 17th, in our post IRS Issue Final Regulations to Combat Offshore Tax Evasion, the US Treasury Department published final rules governing enforcement of the Foreign Account Tax Compliance Act (FATCA). The Final Regulations make a number of changes to the extensive proposed regulations released last February, in particular:
- All debt obligations outstanding on January 1, 2014, are exempt from FATCA.
- Passive entities (such as trusts) that are not professionally managed will be treated as NFFEs, not FFIs.
- The categories of "deemed compliant" FFIs and retirement funds that are considered exempt are expanded.
- All pre-existing accounts held by individuals with balances of $50,000 or less are exempt from review. The threshold for review is raised to $250,000 for pre-existing accounts held by entities and for accounts that are cash value insurance or annuity contracts. Insurance contracts with a balance or value of $50,000 or less are not treated as "financial accounts."
- A participating FFI can determine whether pre-existing accounts with a balance of $1 million or less are U.S. accounts based solely on a search of electronically searchable account information for certain U.S. indicia. In cases of pre-existing accounts held by passive NFFEs, a withholding agent may rely on its review conducted for anti-money laundering ("AML") purposes.
- The ability of FFIs to rely on self-certification by entities holding accounts is expanded.
- All accounts maintained by an FFI prior to January 1, 2014, are treated as pre-existing accounts.
- The due date for the first information reporting by participating FFIs with respect to the 2013 and 2014 calendar years is modified to March 31, 2015.
- Foreign pass-through payments and gross proceeds from sales or dispositions of property occurring before January 1, 2017, are exempt from withholding.