The pending package of compliance rules is understood to cover how foreign financial institutions (FFIs) may fulfil their FATCA obligations to the US tax authorities by reporting some of their clients’ information to their home governments, through an “intergovernmental” format introduced in February.
FATCA, or the Foreign Account Tax Compliance Act, is the controversial new law approved by Congress in 2010, and aimed at cracking down on offshore tax evasion by American citizens. Beginning in 2014, non-US banks will begin to be penalised if they fail to tell the US authorities about any American clients they may have.
As reported, the intergovernmental format for FATCA reporting initially was agreed between the US and the governments of five European countries – the UK, France, Italy, Germany and Spain – with similar agreements subsequently hammered out between the US and Switzerland and Japan.
It is thought by some that the US may consider hastening the announcement due by month’s end to accommodate the needs of the UK Government, which effectively will shut down once the Olympics begins in London on Friday. This would enable the UK to participate in the announcement of the FATCA compliance requirements, since it is involved in one of the intergovernmental arrangements, as it and the other four governments party to the draft intergovernmental agreement did in February.
Then again, some FATCA experts note, the US Treasury has missed other FATCA deadlines before, as it struggles to find ways of making it possible for financial institutions around the world to comply with the law’s onerous requirements in a manageable and cost-effective way.
Kristin Konschnik, a partner and FATCA-watcher at the London offices of Withers, the law firm, says speculation at the moment is that the Treasury is about to release “a model agreement for intergovernmental sharing arrangements, [through] which the US and another country could enter into a bilateral agreement, under which FFIs in the local jurisdiction could report directly to their home country authorities. Information [thus collected] would then be shared with the US, in accordance with existing tax treaty information exchange provisions.”
Such an agreement, she adds, would apply in place of the general FATCA rules when finalised, if preferred by the institutions.
The full set of FATCA compliance rules that are to apply where there are no intergovernmental sharing agreements, Konschnik and others say, is not expected until late summer or early autumn.
Jorge Morley-Smith, head of tax at the London-based Investment Management Association, said the IMA and its member organisations were among those keen to get a look at the next package of FATCA implementation details.
“FATCA is a huge deal for us and our members, and at the moment we just have the draft legislation,” he said.
“And this [the intergovernmental agreement compliance information] could make some significant changes to the way people thought FATCA was to be implemented in the UK.”
