The US government on Friday, 12 July 2013, issued Notice 2013-43 (Notice) announcing revised timelines for implementing provisions under the Foreign Account Tax Compliance Act (FATCA).
The earliest date for banks, insurance companies, investment funds and other foreign financial institutions (FFIs) impacted by FATCA to be ready has been postponed by six months until 1 July 2014. Before this announcement, the FATCA provisions were scheduled to become effective according to a phased implementation schedule beginning 1 January 2014.
The six-month extension will provide financial institutions in Asia with more time to comply with FATCA. It will also allow the US government to draft and issue the necessary forms, guidance, clarification, and interpretation on FATCA. It will also allow the US government and potential FATCA partner countries more time to agree to and sign intergovernmental agreements (IGAs).
“The initial schedule did not provide sufficient time for many financial institutions in Hong Kong and Asia to modify current business practices and to make the necessary modifications to systems and processes. Also, the continued uncertainty about whether certain jurisdictions would agree to an IGA, when they would be signed and how they would impact the FATCA requirements, further hindered the ability of financial institutions to comply on a timely basis,” says Tim Clough, Risk and Controls Assurance Partner, PwC Hong Kong.
“Even with this announcement, financial institutions still have a substantial amount of work to do to get ready for the earliest portions of FATCA. Given this, we hope that this announcement does not cause Hong Kong financial institutions’ current FATCA efforts to lose momentum” says Angelica Kwan, US Tax Partner, PwC Hong Kong.
The six-month extension will affect FATCA new customer onboarding procedures and withholding requirements, the earliest effective date of a FFI agreement and various other requirements.