On February 8, 2012, the Department of Treasury (the "Treasury") and the Internal Revenue Service (the "Service") issued proposed regulations under the Foreign Account Tax Compliance Act ("FATCA"). FATCA establishes a new US information reporting regime that requires foreign financial institutions ("FFIs") to agree to provide the United States with specific information about their US account holders or be subject to a 30 percent withholding tax on various categories of US source payments and certain passthru payments received from other FFIs. The proposed regulations incorporate, refine and modify prior FATCA guidance as well as provide guidance on topics not previously addressed.
In connection with the issuance of the proposed regulations, the Treasury issued a Joint Statement from the United States, France, Germany, Italy, Spain, and the United Kingdom setting forth the framework for an intergovernmental approach to FATCA implementation in lieu of requiring FFIs established in those countries to report directly to the Service. The Joint Statement addresses concerns raised by governments, financial institutions and practitioners that FATCA reporting may violate various foreign privacy and data protection laws.
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