Fatca is the latest regulation to be delayed over implementation confusion.
The Internal Revenue Service announced late last week that it would hold off on implementing the US Foreign Accounts Tax Compliance Act (Fatca) until June 2013. The law, passed in March 2010, forces foreign financial institutions to give large amounts of client data to the IRS, or face a 30 percent withholding penalty from US sources.
Fatca would force corporate treasury to manage that process, determining which foreign financial institutions were breaching the law and withholding the 30 percent on dividends and interest (see related story here). This is something few accounts payable systems can handle today.
The Wall Street lobby SIFMA applauded the delay, which had been sought principally by US broker/dealers and asset managers. But corporate treasurers also raised concerns, especially given the original implementation deadline – the end of this year – and the fact that the IRS has not yet issued full guidance on implementation. The 18-month delay gives the lobby crucial time to attempt to derail or water down the legislation before it is implemented.
The IRS attempted to put a good face on the delay. Commissioner Doug Shulman said, “At the same time, the IRS recognizes that implementing FATCA is a major undertaking for financial institutions. Today’s notice is a reflection of our serious commitment to implementation of the statute, but also a serious commitment to listen to the implementation challenges of affected financial institutions and make appropriate adjustments to ensure a smooth and timely roll-out.”