Thursday, November 17, 2011

IRS On Track to Issue Proposed Rules, Draft Bank Agreement Under FATCA

Internal Revenue Service is “on track” to issue proposed regulations on the Foreign Account Tax Compliance Act (FATCA) around the end of the year, a top IRS international official said Nov. 17.

IRS Large Business & International Division Deputy Commissioner (International) Michael Danilack said if the guidance does not come out by Dec. 31, he expects it will be issued shortly thereafter.

Danilack said that along with the regulations, IRS hopes to issue a draft agreement for foreign financial institutions that want to start reporting U.S.-owned accounts to U.S. tax authorities under FATCA. The law requires such reporting or banks may face a 30 percent withholding tax.

The IRS official said if the draft agreement does not come out together with the rules, it will be issued soon after that guidance is released. He said IRS is envisioning a system where banks will be able to apply online and will be immediately given an identification number. “We're in very good shape on that,” Danilack said.

In another key point, the official said he expects that there will be bilateral agreements between the United States and other countries on the implementation of FATCA.

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