The Internal Revenue Service and Treasury Department issued guidance Oct. 24, which provides certain timelines for withholding agents and foreign financial institutions to complete due diligence required under the Foreign Account Tax Compliance Act (FATCA).
Announcement 2012-42 comes in response to a flurry of comments about FATCA proposed rules (REG-121647-10) issued in February and designed to tackle tax evasion.
Comments identified practical issues in implementing the chapter 4 rules within the proposed time frames and also requested that obligations that may give rise to foreign passthrough payments be treated as grandfathered obligations under certain conditions, among other concerns, IRS said.
IRS recognized these issues and provided guidance concerning certain grandfathered obligations and withholding on gross proceeds in Announcement 2012-42.
This announcement outlines:
(i) certain timelines for withholding agents and foreign financial institutions (FFIs) to complete due diligence and other requirements and
(ii) certain additional guidance concerning gross proceeds withholding and the status of certain instruments as grandfathered obligations under sections 1471 through 1474 of the Internal Revenue Code (Code).
The Department of the Treasury (Treasury Department) and the Internal Revenue Service (IRS) intend to incorporate the rules described in this announcement in final regulations under sections 1471 through 1474.
The announcement also includes a table to summarize the timing of certain due diligence requirements for withholding agents and financial institutions.
Announcement 2012-42 publishes Nov. 19 in Internal Revenue Bulletin 2012-47.
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