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Is FATCA on Your Radar?

American entities with foreign accounts could see changes under FATCA.

United States-based companies may not deal with businesses overseas or hold offshore accounts, but for multinational corporations that do hold foreign financial institution status - including trust companies, brokerage firms and investment funds - the Foreign Account Tax Compliance Act (FATCA)

United States-based companies may not deal with businesses overseas or hold offshore accounts, but for multinational corporations that do hold foreign financial institution status - including trust companies, brokerage firms and investment funds - the Foreign Account Tax Compliance Act (FATCA) could have a significant impact on reporting practices.

"FATCA is an important development in U.S. efforts to combat offshore noncompliance. At the same time, the IRS recognizes that implementing FATCA is a major undertaking for financial institutions," said Internal Revenue Service Commissioner Doug Shulman when the agency introduced the latest timeline for FFIs.

Notice 2011-53, issued earlier in July, addresses how Foreign Financial Institutions (FFIs) identify pre-existing, new and some high-risk U.S. accounts, setting up due diligence requirements that start in 2013 and reporting requirements that begin in 2014.

According to a briefing from DLA Piper, FATCA presents two "fundamental issues" with local laws and passthru payments. FFIs might not be able to comply with all FATCA's provisions if they conflict with local laws, a conflict that DLA Piper says the institutions must address before the regulation goes into effect. Additionally, the IRS is still seeking public comment on its treatment of passthru payments, which could currently create "expansive and costly compliance burdens on participating FFIs."  

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