Implementation of some of the FATCA rules–1 July 2014

Implementation of some of the FATCA rules–1 July 2014

Implementation of the FATCA regime was originally intended to commence on 1 January 2013 but following several delays, it begins to take effect from today, 1 July 2014. Further implementation will take place in phases throughout 2015–17.

From 1 July 2014:

  • Grandfather period expires for issuance of obligations exempted from FATCA withholding (unless the obligation gives rise to a withholdable payment solely because the obligation is treated as giving rise to a dividend equivalent or unless the obligation requires a secured party to make a payment with respect to, or to repay, collateral posted to secure a grandfathered obligation)
  • Withholding required on US source fixed or determinable annual or periodic (FDAP) payments to non-participating foreign financial institutions (FFIs), on-compliant non-financial foreign entities (NFFEs), and recalcitrant account holders
  • Withholding required on US source FDAP payments to prima facie FFIs

The current expectation for further implementation is as follows:

  • 1 January 2015: Date that withholding agents need obtain a Global Intermediary Identification Number (GIIN) for payments made before 1 January 2015 to an FFI that is reporting in a Model 1 intergovernmental agreement (IGA) jurisdiction
  • 1 January 2015: Withholding required on payments to NFFEs made with respect to a pre-existing obligation to a payee that is not a prima facie FFI or a passive NFFE with one or more substantial US owners
  • 1 January 2016: Withholding on payments with respect to pre-existing obligations that are outstanding on 30 June 2014 unless payee is a non-participating FFI or the payee is not prima facie FFI
  • 1 January 2017: Withholding on gross sale, redemption and retirement proceeds of assets of type that produce US source interest/investment income paid to non-participating FFIs and recalcitrant payees
  • Later of: (a) 1 January 2017, and (b) the date on which final FATCA Regulations defining a  ‘foreign passthru payment’ are issued: Withholding on passthru payments
  • 1 January 2017: Withholding required on US source FDAP payments made with respect to an offshore obligation




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About the author:

Neeta started her legal career at Allen & Overy in 2008 in the midst of the global financial crisis and the collapse of Lehmans where she gained most of her paralegal experience.

Neeta also did a short stint in litigation at the Revenue and Customs Prosecutions Office in 2006. Neeta graduated with a 2:1 honours degree from University of London, Queen Mary College and went on to obtain a distinction from the College of Law in the Legal Practice. She has been working at Lexis Nexis since April 2013.