With only 110 days left before the effective start date of the Foreign Account Tax Compliance Act (FATCA), financial institutions worldwide aren’t the only ones scrambling to implement the sweeping financial account reporting law. The US Internal Revenue Service is also racing to finalize certain regulations and reporting forms that are at the center of FATCA compliance.
Last week, one of the last pieces of the FATCA puzzle fell into place, as the IRS released a series of revisions to the law’s implementing regulations, along with the latest versions of several key FATCA forms.
The IRS has also provided instructions for some forms, including Form W-8BEN-E and W-8ECI, which were previously released without any accompanying guidance. Form W-8BEN-E will be used by legal entities to provide documentation of their FATCA status to financial institutions, which will help verify whether they are “US persons” that must be reported under FATCA. Form W-8ECI can be used by certain businesses to claim exemption from FATCA requirements.
Particularly in the complex world of FATCA compliance, instructions provided along with reporting forms are often just as important as the forms themselves, as they clarify the form’s scope, use and fields on the form that might otherwise be misinterpreted.
The revisions to the final regulations are largely focused on amending existing chapters of the US Internal Revenue Code to align with FATCA’s withholding requirements. As a penalty to drive FATCA compliance, the law imposes a 30% withholding tax on many types of payments coming from the US to financial institutions that do not comply with FATCA.
While the IRS has stated it will issue minor revisions to existing regulations, as well as final versions for some regulations that are still in temporary form, the agency has said there will be no more delays to FATCA implementation. On July 1, institutions globally should be ready for the FATCA switch to be flipped on.