US delays FATCA implementation by a further 6 months

The IRS has delayed the start implementation date of the FATCA implementation by a further 6 months from January 1st 2014 to July 1st 2014.

Treasury Deputy Assistant Secretary for International Tax Affairs Robert B. Stack. is reported as saying the delay is due to overwhelming interest in FATCA - “Given the groundswell of international interest in FATCA, we are providing an additional six months to complete agreements with countries and jurisdictions across the globe, before withholding begins."

It is widely reported that the real reason for the delay is the low compliance rate with just 9 agreements in place worldwide and in excess of 80 still under discussion.

Enacted by Congress in 2010, FATCA targets non-compliance by U.S. taxpayers using foreign accounts. FATCA requires foreign institutions to tell the IRS about accounts held by U.S. taxpayers or foreign entities in which U.S. taxpayers hold substantial ownership. To avoid withholding, a participating institution must enter into an agreement with the IRS to: 

• Identify U.S. accounts; 
• Report certain information to the IRS regarding U.S. accounts; and 
• Withhold a 30% tax on certain payments to non-participating FFIs and account holders unwilling to provide the required information. 

Foreign institutions that don’t sign an agreement with the IRS face withholding on payments, including U.S. source interest and dividends, gross proceeds from the disposition of U.S. securities, and pass-through payments.

You can see the official notice here

Read more on forbes.com here