The proposed regulations would allow overseas banks to use information they already collect to comply with due diligence requirements, the Treasury said in a press release today. The proposal also will adjust the withholding requirement's implementation schedule and expand the range of financial institutions that won't be required to enter into formal agreements with the Internal Revenue Service.
The move is intended to address the concerns of overseas financial institutions while making it clear that the U.S. intends to implement the Foreign Account Tax Compliance Act, or FATCA. The 2010 law requires banks to withhold 30% from the accounts of U.S. clients who don't disclose enough identifying information to the IRS.
"When taxpayers overseas avoid paying what they owe, other Americans have to bear a disproportionate share of the tax burden," Emily McMahon, the Treasury's acting assistant secretary for tax policy, said in the press release. "FATCA is an important part of the U.S. government's effort to address that issue and these regulations implement FATCA in a way that is targeted and efficient."
Overseas financial institutions including Toronto-Dominion Bank of Canada, Allianz SE of Germany and Aegon NV of the Netherlands have said previous iterations of FATCA were too complex.
The Treasury said it wouldn't exempt any country from FATCA's compliance requirements. In the press release today, Treasury said it would issue a joint statement with France, Germany, Italy, Spain and the U.K. "expressing mutual intent to pursue a government-to-government framework for implementing FATCA."
