FATCA

Two changes to the Foreign Account Tax Compliance Act (FATCA) reporting criteria have been unveiled ahead of the 31 May return deadline.

The first update means UK financial institutions are no longer required to file nil returns – although such a document will still be necessary to make an election where the institution is in a nil position through applying the de minimis $50,000 or $250,000 threshold on pre-existing accounts.

The US tax authority, the Internal Revenue Service (IRS), has announced a relaxation of enforcement and administration of the due diligence, reporting, and withholding provisions under FATCA for 2014 and 2015 for entities that have made “good faith efforts to comply” with the regulations. (See IRS notice 2014-33 Further Guidance on the Implementation of FATCA and Related Withholding Provisions.)

The UK and USA have updated annex II of their agreement to implement the Foreign Account Tax Compliance Act (FATCA).

The move will see a wider range of financial institutions and products become effectively exempt from FATCA’s requirements. The revised annex also provides greater clarity on the categories of bodies that will be non-reporting UK financial institutions treated as deemed-compliant.