Fatca delay caused by IGAs, expert says
Another delay in Fatca timelines is as a direct result of Intergovernmental Agreements (IGAs), one expert warns
The US Foreign Account Tax Compliance Act (Fatca) has been delayed once again – as a direct result of the intergovernmental agreements (IGA), according to one industry expert. The US Internal Revenue Service (IRS) announced this week that various aspects of Fatca have been delayed, most notably new account onboarding procedures and the timeline for entering into a foreign financial institution (FFI) agreement with the IRS.
Instead of the start of next year, institutions now have until January 2014 to put compliance procedures in place, and until January 2017 to start withholding taxes from customer accounts.
For jurisdictions with an IGA, the FFI agreement is not relevant, but so far only one jurisdiction has signed an IGA with the US – the UK – and this is what one industry expert believes is holding Fatca up.
“It seems almost certain that one of the main drivers behind the delay is the recognition that all IGAs must be agreed in advance of the first Fatca deadlines,” says Colin Camp, managing director of products and strategy at software provider Dion in Leicester.
Chris Tragheim, head of Fatca for Europe, the Middle East and Africa at Deloitte UK in London, says this week’s notice was an effort to get everybody following the same timelines as those of the UK’s IGA, but he is not convinced that all IGAs need to be in place before Fatca deadlines can be implemented.
“I’m not sure that it’s true to say that Fatca can’t go ahead until the IGAs are negotiated,” he says. “What the notice this week really does is align everybody that is outside the IGA with the model agreement as far as timing’s concerned. It’s good news and a relief for non-IGA countries.”
Camp agrees that the notice makes Fatca’s timelines more realistic. But he warns that with the anticipated IGAs comes complications. “The IGAs are bringing further complexity to the picture, because of the variety of requirements that they introduce,” he says.
“The delay highlights the scale of the legislation and the implications of the implementation. This has increased still further with the arrival of IGAs, which have introduced input from multiple other countries on what form customer classification and remediation requirements should take, particularly as most of the IGAs under discussion are reciprocal.”
Tragheim agrees that there could be complicated times ahead under Fatca. “It’s just a matter of fact that IGAs include reciprocity clauses and that is a matter of intense consideration within the US about collecting that information and passing it through to the competent authorities,” he says. “It’s a sizeable task.”
This article was first published in Operational Risk & Regulation on Risk.net