On July 14, 2011, in Notice 2011-53 (the "Notice"), the US Department of the Treasury (the "Treasury") and the Internal Revenue Service (the "Service") issued guidance outlining phased implementation of the new US withholding regime and information reporting requirements for certain accounts maintained by foreign financial institutions ("FFIs") (commonly referred to as the Foreign Account Tax Compliance Act provisions, or the "FATCA provisions"). While the Notice provides that certain obligations of "participating FFIs" (as described below) will commence in 2013, withholding of certain US source payments will begin on January 1, 2014 and withholding on all "withholdable payments" pursuant to the FATCA provisions will begin on January 1, 2015.
Specifically, the Notice "phases in" the implementation of FATCA in the following manner:
(1) Withholding on US source dividends, interest and other "FDAP-type" income will apply to payments made on or after January 1, 2014, and withholding on all "withholdable payments" (including on gross proceeds) will be fully phased in for payments made on or after January 1, 2015.
(2) An FFI will be required to enter into an agreement with the IRS by June 30, 2013, to ensure that it will be identified as a "participating FFI" in sufficient time to allow withholding agents to refrain from withholding beginning on January 1, 2014. The IRS will begin accepting FFI applications through its electronic submissions process no later than January 1, 2013.
(3) A participating FFI (i.e., an FFI that has entered into an agreement with the IRS (an "FFI Agreement")) will be required to put in place account opening procedures, as described in Notice 2010-60, and as implemented in future Treasury Regulations, to identify US accounts among accounts opened on or after the effective date of its FFI Agreement.
(4) A participating FFI will be required to have completed due diligence procedures with respect to pre-existing private banking accounts within one year of the effective date of its FFI Agreement (the deadline is the later of December 31, 2014 or the date that is one year after the effective date of its FFI Agreement for private banking accounts that have a balance or value of less than US$500,000). For all other pre-existing accounts, a participating FFI will be required to complete due diligence procedures within two years of the effective date of its FFI Agreement. Future Treasury Regulations will provide further guidance on the scope of the due diligence procedures.
(5) An account for which a participating FFI has received a Form W-9 from the account holder by June 30, 2014 must be reported to the IRS as a US account by September 30, 2014. Modified reporting requirements will be available for the first year of reporting. Reporting with respect to recalcitrant account holders identified by June 30, 2014 will be required to be filed with the IRS by September 30, 2014. Reporting with respect to 2014 and later years will be required as contemplated by the preliminary guidance and as implemented in future regulations.
Treasury and the IRS anticipate issuing proposed regulations incorporating the guidance provided in the Notice, as well as in Notice 2010-60, as amended and supplemented by Notice 2011-34, by December 31, 2011. After consideration of comments, Treasury and the IRS anticipate publishing final regulations in the summer of 2012.
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