US Department of the Treasury News Release
Treasury and IRS Issue Final Regulations to Combat Offshore Tax Evasion
1/17/2013
NOTE: This document is scheduled to be published in the Federal Register on 01/28/2013 and available online at http://federalregister.gov/a/2013-01025, and on FDsys.gov
Treasury Advances Efforts to Secure International Participation, Streamline Compliance, and Prepare for Implementation of the Foreign Account Tax Compliance Act
WASHINGTON – The U.S. Department of the Treasury and the Internal Revenue Service (IRS) today issued comprehensive final regulations implementing the information reporting and withholding tax provisions commonly known as the Foreign Account Tax Compliance Act (FATCA). Enacted by Congress in 2010, these provisions target non-compliance by U.S. taxpayers using foreign accounts. The issuance of the final regulations marks a key step in establishing a common intergovernmental approach to combating tax evasion.
These regulations provide additional certainty for financial institutions and government counterparts by finalizing the step-by-step process for U.S. account identification, information reporting, and withholding requirements for foreign financial institutions (FFIs), other foreign entities, and U.S. withholding agents.
“These regulations give the Administration a powerful set of tools to combat offshore tax evasion effectively and efficiently,” said Deputy Secretary Neal Wolin. “The final rules mark a critical milestone in international cooperation on these issues, and they provide important clarity for foreign and U.S. financial institutions.”
The final regulations issued today:
- Build on intergovernmental agreements that foster international cooperation. The Treasury Department has collaborated with foreign governments to develop and sign intergovernmental agreements that facilitate the effective and efficient implementation of FATCA by eliminating legal barriers to participation, reducing administrative burdens, and ensuring the participation of all non-exempt financial institutions in a partner jurisdiction. In order to reduce administrative burdens for financial institutions with operations in multiple jurisdictions, the final regulations coordinate the obligations for financial institutions under the regulations and the intergovernmental agreements.
- Phase in the timelines for due diligence, reporting and withholding and align them with the intergovernmental agreements. The final regulations phase in over an extended transition period to provide sufficient time for financial institutions to develop necessary systems. In addition, to avoid confusion and unnecessary duplicative procedures, the final regulations align the regulatory timelines with the timelines prescribed in the intergovernmental agreements.
- Expand and clarify the scope of payments not subject to withholding. To limit market disruption, reduce administrative burdens, and establish certainty, the final regulations provide relief from withholding with respect to certain grandfathered obligations and certain payments made by non-financial entities.
- Refine and clarify the treatment of investment entities. To better align the obligations under FATCA with the risks posed by certain entities, the final regulations: (1) expand and clarify the treatment of certain categories of low-risk institutions, such as governmental entities and retirement funds; (2) provide that certain investment entities may be subject to being reported on by the FFIs with which they hold accounts rather than being required to register as FFIs and report to the IRS; and (3) clarify the types of passive investment entities that must be identified and reported by financial institutions.
- Clarify the compliance and verification obligations of FFIs. The final regulations provide more streamlined registration and compliance procedures for groups of financial institutions, including commonly managed investment funds, and provide additional detail regarding FFIs’ obligations to verify their compliance under FATCA.
Progress on International Coordination, Including Model Intergovernmental Agreements
Since the proposed regulations were published on February 15, 2012, Treasury has collaborated with foreign governments to develop two alternative model intergovernmental agreements that facilitate the effective and efficient implementation of FATCA.
These models serve as the basis for concluding bilateral agreements with interested jurisdictions and help implement the law in a manner that removes domestic legal impediments to compliance, secures wide-spread participation by every non-exempt financial institution in the partner jurisdiction, fulfills FATCA’s policy objectives, and further reduces burdens on FFIs located in partner jurisdictions. Seven countries have already signed or initialed these agreements.
Today, Treasury announced for the first time that Norway has joined the United Kingdom, Mexico, Denmark, Ireland, Switzerland, and Spain as countries that have signed or initialed model agreements. Treasury is engaged with more than 50 countries and jurisdictions to curtail offshore tax evasion, and more signed agreements are expected to follow in the near future.
Additional Background on the Model Agreements
On July 26, 2012, Treasury published its first model intergovernmental agreement (Model 1 IGA). Instead of reporting to the IRS directly, FFIs in jurisdictions that have signed Model 1 IGAs report the information about U.S. accounts required by FACTA to their respective governments who then exchange this information with the IRS.
Treasury also developed a second model intergovernmental agreement (Model 2 IGA) published on November 14, 2012. A partner jurisdiction signing an agreement based on the Model 2 IGA agrees to direct its FFIs to register with the IRS and report the information about U.S. accounts required by FATCA directly to the IRS.
These agreements do not offer an exemption from FATCA for any jurisdiction but instead offer a framework for information sharing pursuant to existing bilateral income tax treaties. Under both models, all financial institutions in a partner jurisdiction that are not otherwise excepted or exempt must report the information about U.S. accounts required by FATCA. Therefore, the IRS receives the same quality and quantity of information about U.S. accounts from FFIs in jurisdictions with IGAs as it receives from FFIs applying the final regulations elsewhere, but these agreements help streamline reporting and remove legal impediments to compliance.
Background on FATCA
FATCA was enacted in 2010 by Congress as part of the Hiring Incentives to Restore Employment (HIRE) Act. FATCA requires FFIs to report to the IRS information about financial accounts held by U.S. taxpayers, or by foreign entities in which U.S. taxpayers hold a substantial ownership interest. In order to avoid withholding under FATCA, a participating FFI will have to 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 percent tax on certain U.S.-connected payments to non-participating FFIs and account holders who are unwilling to provide the required information.
Registration will take place through an online system. FFIs that do not register and enter into an agreement with the IRS will be subject to withholding on certain types of payments relating to U.S. investments.
Treasury and IRS will continue to work closely with businesses and foreign governments to implement FATCA effectively. Updates and further information on FATCA can be found by visiting the FATCA page at Treasury.gov or IRS.gov.
###
Battle lines are drawn…
http://www.treasury.gov/resource-center/tax-policy/treaties/Documents/FATCA-Model-2-Agreement-to-Implement-11-14-2012.pdf
This would be an outrageous violation of Canadian privacy laws and the Canadian Charter!!! This will not come to pass.
Notice that there is NO evidence or even claim of reciprocity or benefit to the countries reporting to the US.
It does not disguise that this is a made-in-US law, and that the US is dictating to the globe what they all must do.
4. Notwithstanding a finding of U.S. indicia under subparagraph B (1) of
this section, a Reporting [FATCA Partner] Financial Institution is not required
to treat an account as a U.S. Account if:
a) Where Account Holder information unambiguously indicates a
U.S. place of birth, the Reporting [FATCA Partner] Financial Institution
obtains or has previously reviewed and maintains a record of:
(1) a self-certification that the Account Holder is neither a
U.S. citizen nor a U.S. resident for tax purposes (which may be
on an IRS Form W-8 or other similar agreed form);
(2) a non-U.S. passport or other government-issued identification evidencing the Account Holder’s citizenship or nationality in a country other than the United States; and
(3) a copy of the Account Holder’s Certificate of Loss of Nationality of the United States or a reasonable explanation of:
(a) the reason the Account Holder does not have such a
certificate despite renouncing U.S. citizenship; or
(b) the reason the Account Holder did not obtain U.S.
citizenship at birth.
*reasonable explanation of…
I SWORE ALLEGIANCE TO THE QUEEN 20 YEARS AGO AND TOLD THE US TO BUGGER OFF.
:
This is a U.S. centered law and is in no way a “collaborative” effort. The U.S. reserves exclusive right to change the rules at any time and will only make adjustments as are needed to further U.S. ends. This is not a tax system for the world.
All that other countries and financial entities that cooperate are trying to do is to AVOID U.S. levied financial trade sanctions.
http://www.accountingtoday.com/news/Treasury-Releases-Final-FATCA-Regulations-Fight-Offshore-Tax-Evasion-65394-1.html
Washington, D.C. (January 17, 2013)
By Michael Cohn
“The Treasury Department and the Internal Revenue Service have issued
a long-awaited set of final regulations implementing the information
reporting and withholding tax provisions of the Foreign Account Tax
Compliance Act aimed at combating offshore tax evasion, with
far-reaching implications for U.S.-born taxpayers abroad in addition to
foreign financial institutions as well as U.S. banks.”
As well as U.S. Banks? Nothing in the official release alluded to anything that the US would offer.
@All
This was a good strategic move by Treasury:
Certain retirement funds, life insurance and other “low-risk” financial products held abroad, which are not considered havens for dodging taxes, are exempted from reporting their U.S. account holders’ information to the IRS. Financial firms and foreign governments had been calling for these exemptions.
Since the bank are already neutered, Treasury avoids picking a fight with these non-banks – for the time being. What they will not want to realize is, that having accepted IRS as their sovereign, this dispensation is unilaterally revocable at any future date.
More to come sure. Meanwhile, we can get ready to hear the hosannas from the FCC (“FATCA Compliance Complex”).
KMPG rumor was right. So, now the battle is really enjoined.
Shouldn’t the headline be
Treasury and IRS Issue Final Regulations to sabotage the World’s economy with FATCA
Does this mean Flaherty’s IGACS (I’m Gonna Abdicate Canada’s Sovereignty) will be coming soon? There have been some mentions of the possibilities of FATCAcides lately but I hope nobody will even think about climbing aboard an iceflow at this point. There is still some stomping to be done and we need all the feet in the mission march that we can get.
Rollin’ Rollin’ Rollin’
Keep movin’, movin’, movin’,
Though they’re disapprovin’,
Keep them CLNs movin’ Rawhide!
Don’t try to understand ’em,
Just rope and throw and grab ’em,
Soon we’ll be living high and wide.
*@Em
I was just thinking the same thing. Now we ought to find out if our Canadian politicians have any backbone…I’m not holding my breath…
Great, Patrick Henry.
“And, REAL FREEDOM, at the end of our ride!”
The_Animal
Submitted on 2013/01/12 at 12:44 pm
(I tried to put Animal’s great photo in here, don’t know how!)
Evidently the bald eagles know “freedom” and “happiness” when they see it. That’s why 10,000 of “America’s National Icon” flock to Harrison Mills making it the largest gathering of bald eagles in North America. So if the bald eagles know that they’re free and clear up here in Canada, why is it that people are still drinking Obama’s Kool-Aid?
This bald eagle was photographed by me yesterday at Boundary Bay Airport and used in an image meld.
Oh, goodness, I have to read the part that Joe Smith quoted several times. It appears that you need a foreign passport or other identification AND a CLN or reasonable explanation (whatever in hell that is–no reasonable explanation has ever been given for what a reasonable explanation is). I thought for a second that one could provide the one OR the other, but sadly, I was mistaken. That of course would be far more reasonable, that if you were in your country of citizenship, you wouldn’t have your bank account information revealed to the f-ing United States. but I guess that’s too much to ask of the brain dead imbeciles in Washington (people that Mopsick called the brightest and best–Lord help us).
The UNITED STATES is really f@$#%-up if they think that they can get away with this $!#@.
Exempting RRSP’s to be sure is a good move, but does that include TFSAs and RESPs?
Here is another story:
Time to prime the cannons – full-page ads, PSA’s, class-action suits and Charter challenges. I too believe that a Canadian IGA is waiting just over the next hill, and we’d better prepare to react as soon as it shows its cowardly face.
I can’t wait for the Harper government and the Canadian Bankers Association to walk-back everything they’ve said and try to justify to the Canadian people their capitulation to the United States. If you powerful decision-makers in your wood-paneled offices are reading this – and we know you are – then take this as fair warning: you will not succeed in quietly announcing your treachery in the dead of night; we will not accept it quietly; and you will soon learn that you have made the greatest political, business and diplomatic miscalculation in Canadian history.
To All:
For those who can — Financial Contributions link at the bottom of the home page. A deficit for Isaac Brock Society shows right now. We can do better than that if we want to win this fight.
Tell me where to mail the cheque and I’ll contribute to ads, forums, lobbying efforts, lawsuits, transportation to head-to-head meetings with MPs, whatever it takes to get FATCA repealed. I’m getting madder by the minute and as Gerald Celente often says, “When you have nothing left to lose you lose it.” Okay, maybe I’m not quite at that point yet but if nothing else, FATCA FINAL and the possibility of IGACS coming soon has made me think that if the FFIs can’t see fit to contribute a tiny fraction of their compliance money to fund some defiance then it may be up to us.
@ calgary411
That address I know and I have contributed but another cheque will be on the way shortly. I didn’t know that little box was at the bottom of the page though.
http://isaacbrocksociety.ca/financial-contributions/ is the link at the bottom of the home page, with instructions for anyone ABLE to contribute to the Isaac Brock Society.
There may have to be separate efforts to contribute for specific ads, lobbying, lawsuits.
Thanks, Em. You’re right, it isn’t conspicuous enough. I just made another donation as well. Petros has footed so much of this resource made available to us all. I know I have benefitted enormously.
A Mopsick compilation:
http://www.mopsicktaxlaw.com/news.shtml
Is the Brock vigilante-granfalloon getting too excited too fast about the foma bubbling up from its wampeter? You all need to understand your Bokonism before making witless sacrifices.
FATCA is a complex doc, and I ain’t no lawyer or accountant. But it looks like the “review” of pre-existing accounts at all levels is limited to the information that the banks already have, plus an annual fuzzy polling of an account relationship manager, if there happens to be one. The indicia flowchart latched onto by Joe Smith seems to be for new accounts opened after start of 2014. And for those it says this at III.A.1 – A New Individual Account that is a Depository Account is not required to be reviewed, identified, or reported as a U.S. Account unless the account balance exceeds $50,000 at the end of any calendar year. So keep the balance in any one post-2014 new account below $50K and no review. (Variant on the Petros scheme for 26 accounts to befuddle FBAR.) Did I miss something?
Don’t get me wrong, you know I have no use for the Bunkum Slam regime of creepy unfreedom. But I’d hate to see a panicked little herd of Dudley Dorights pouring serious money into the useless pockets of known-complicit mainstream media. You guys really want to pay a piece of Barrie McKenna’s salary? That’s the biggest laugh I’ve had so far in 2013.
“You guys really want to pay a piece of Barrie McKenna’s salary?”
@ usxcanada
Your wordage sometimes befuddles but always impresses me however I don’t understand how contributing to IBS expenses would pay McKenna’s salary. Anyway I’m glad you were amused. I won’t even pretend to understand the “final” FATCA document but I do know that the IRS can/will change it in the future if it isn’t as odious as they would wish it to be. It’s a trick, they always use it. Besides, it isn’t only FATCA. That’s just a wart on the real problem. The real problem is embodied in the tentacles of the vampire squid which suck time and treasure from the IRS chosen ones no matter where in the world they thought they had the right to reside (aka citizenship-based taxation).
@usxcanada- Em is right. It is citizenship based taxation that is the problem as it supplies the underlying rational for FATCA. The refusal of the U.S. to exempt any jurisdiction from FATCA is a direct shot over Canada’s bow. Canada should never ever again talk about having a special relationship with the U.S. Canada is just another foreign country. Nothing special about it at all.
The new rules just mean that for now a U.S. person can move outside of the U.S. but he/she must live in Congressional legislated poverty. 50,000 will not allow you to build any wealth. You still can’t invest. Can’t buy a house.
The U.S. needs to stop violating the human rights of those who are unfortunate enough to have resided there long enough to have gained the ignoble status of, U.S. person for tax purposes. The U.S. is the one member country of the O.E.C.D. that its citizens cannot effectively leave. That violates the individual’s rights to freely enter and leave his/her country of citizenship.
Things may seem acceptable now but they will get worse later on when Congress feels it is in the best interest of the U.S. Treasury. There is nothing here to cheer about. All U.S. persons are just house slaves on the master’s plantation.
*543 pages of bafflegab. RRSPs, RESPs, and RDSPs exempt from reporting by the FFI.