Client Alert
| September 3, 2010
IRS Releases Preliminary Guidance on the Implementation of the FATCA Provisions, Seeks Additional Public Input
On August 27, 2010, the Internal Revenue Service (“IRS”) issued Notice 2010-60 (the “Notice”), providing preliminary guidance on the implementation of the provisions of the Foreign Account Tax Compliance Act (“FATCA”) as incorporated into the Hiring Incentives to Restore Employment Act of 2010 (the “HIRE Act”), which was enacted in March 2010. As we have previously reported,1 the FATCA provisions, which are reflected as new sections 1471-1474 of the Internal Revenue Code, create a new reporting and withholding regime aimed at curbing the use of foreign financial institutions, foreign trusts, and foreign corporations by US individuals to evade US taxes. The FATCA provisions generally impose a new 30 percent withholding regime on “withholdable payments” to foreign financial institutions (“FFIs”) and non-financial foreign entities (“NFFEs”) unless the affected entities successfully overcomes substantial tax administrative requirements. For an FFI, it can escape withholding if it (1) enters into an agreement (“FFI Agreement”) with the IRS to undertake certain due diligence, reporting and withholding responsibilities with respect to “US accounts” or (2) elects to be treated as a US financial institution for tax reporting purposes. For an NFFE, it can escape withholding if it (1) certifies to the withholding agent that it does not have substantial US owners or (2) identifies those substantial US owners.
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This memorandum is intended only as a general discussion of these issues. It is not considered to be legal advice. We would be pleased to provide additional details or advice about specific situations. For additional information on this important topic, please feel free to call upon your Dewey & LeBoeuf relationship partner. No part of this publication may be reproduced, in whole or in part, in any form, without our prior written consent.
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