IRS Finalizes Agreement for Banks to Sign Up for Direct FATCA Reporting

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The Internal Revenue Service unveiled the eagerly awaited final agreement for foreign financial institutions (FFIs) that want to sign up for direct reporting of their U.S.-owned accounts under the Foreign Account Tax Compliance Act in Rev. Proc. 2014-13.
The Dec. 26 move is key to many banks and other financial entities that will have to start reporting and withholding under the 2010 law on July 1, 2014. While the agreement is largely similar to the draft version the IRS issued in October, tax practitioners said a welcome change in the final FFI agreement gives new flexibility to institutions that have “Model 2” intergovernmental agreements (IGAs) with the U.S. to implement FATCA (210 DTR G-7, 10/30/13).
They also said the new agreement contains an approach toward definitions by cross-referencing that is very helpful. All the practitioners interviewed by Bloomberg BNA said they are looking forward to the two new sets of FATCA guidance that the IRS said it expects to issue in January. One attorney praised the fact that the government seemed to be indicating it would have an updated, more inclusive definition of a branch in that upcoming guidance.

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