- Build on intergovernmental agreements that foster international cooperation. The Treasury Department has collaborated with foreign governments to develop and sign intergovernmental agreements that facilitate the effective and efficient implementation of FATCA by eliminating legal barriers to participation, reducing administrative burdens, and ensuring the participation of all non-exempt financial institutions in a partner jurisdiction. In order to reduce administrative burdens for financial institutions with operations in multiple jurisdictions, the final regulations coordinate the obligations for financial institutions under the regulations and the intergovernmental agreements.
- Phase in the timelines for due diligence, reporting and withholding and align them with the intergovernmental agreements. The final regulations phase in over an extended transition period to provide sufficient time for financial institutions to develop necessary systems. In addition, to avoid confusion and unnecessary duplicative procedures, the final regulations align the regulatory timelines with the timelines prescribed in the intergovernmental agreements.
- Expand and clarify the scope of payments not subject to withholding. To limit market disruption, reduce administrative burdens, and establish certainty, the final regulations provide relief from withholding with respect to certain grandfathered obligations and certain payments made by non-financial entities.
- Refine and clarify the treatment of investment entities. To better align the obligations under FATCA with the risks posed by certain entities, the final regulations: (1) expand and clarify the treatment of certain categories of low-risk institutions, such as governmental entities and retirement funds; (2) provide that certain investment entities may be subject to being reported on by the FFIs with which they hold accounts rather than being required to register as FFIs and report to the IRS; and (3) clarify the types of passive investment entities that must be identified and reported by financial institutions.
- Clarify the compliance and verification obligations of FFIs. The final regulations provide more streamlined registration and compliance procedures for groups of financial institutions, including commonly managed investment funds, and provide additional detail regarding FFIs’ obligations to verify their compliance under FATCA.
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