Tax & Accounting Blog

FATCA Compliance Updated by IRS Notice 2013-69

1099, Blog, ONESOURCE Nonresident Alien Taxation, Tax Information Reporting, Trust Tax, W-8 & W-9 Foreign Reporting November 11, 2013

Color Balloon 320IRS Notice 2013-69 provides new guidance for foreign financial institutions (FFIs) that sign an FFI agreement with the IRS for compliance under FATCA (the Foreign Account Tax Compliance Act). Notice 2013-69 also includes guidance for FFIs that are treated as reporting financial institutions under an applicable Model 2 intergovernmental agreement (IGA) between the United States and a foreign country, and are complying with the terms of an FFI agreement as modified by the IGA. Following release of the Notice by the IRS, the U.S. Department of Treasury released amended versions all of its model IGAs and their related Annex documents with minor alterations coordinating with the Notice.

Section II of Notice 2013-69 provides background on the statutory and regulatory requirements for FFIs to be exempt from withholding under IRC chapter 4 (FATCA). Section III describes the general responsibilities of participating FFIs and reporting Model 2 FFIs, and mentions some intended updates to regulations under Internal Revenue Code chapters 4 and 61 and related forms.

Coordination with Form 1099 Reporting. The regulations under chapter 61 will be amended to provide that FATCA reporting can serve instead of Form 1099 reporting except where backup withholding applies. Specifically, a non-U.S. payer (a payer other than a U.S. payer or U.S. middleman as defined in section 1.6049-5(c)(5)) that is a participating FFI (including a reporting Model 2 FFI) or is a reporting Model 1 FFI will satisfy its reporting obligations under chapter 61 with respect to a U.S. payee (or presumed U.S. payee) that is a non-exempt recipient if such FFI reports such account holder pursuant to the FFI agreement or the applicable Model 1 IGA (including if the FFI reports an account, such as a depository account with a balance or value that does not exceed $50,000, as a U.S. account). However, if the FFI is required to apply backup withholding to the payment, the FFI is required to report on Form 1099.

Coordination with Backup Withholding Rules. Regulations will be issued to provide that withholding under section 3406 (backup withholding) will not apply to a reportable payment made by a participating FFI if the participating FFI (including a reporting Model 2 FFI) has withheld on the payment under section 1.1471-4(b). A reportable payment that is not subject to withholding under chapter 4 remains subject to backup withholding under section 3406. Alternatively, a participating FFI may elect to satisfy its withholding obligations under section 1.1471-4(b) with respect to accounts held by recalcitrant account holders that are known U.S. persons by withholding pursuant to section 3406 at the backup withholding rate.

Section IV of Notice 2013-69 covers the procedures for FFIs to register as for participating FFI or reporting Model 2 FFI status. Section V provides the text of a draft FFI Agreement.
See Notice 2013-69 at http://www.irs.gov/pub/irs-drop/n-13-69.pdf

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