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Recently, the Internal Revenue Service (IRS) updated Publication 5118 to reflect new changes made to the Foreign Account Tax Compliance Act (FATCA) Online Registration System for sponsored entities. Given these new changes, now may be an opportune time to review the basics of FATCA as well as what to expect moving forward.
The Hiring Incentives to Restore Employment (HIRE) Act added Chapter 4, known as FATCA, to the Internal Revenue Code in 2010. Under FATCA rules, withholding agents are required to withhold a 30% tax to foreign financial institutions (FFI) for certain payments unless the FFI:
Generally, FATCA rules are used as an enforcement method for reporting requirements. Chapter 4 also requires withholding, documenting and reporting requirements on withholding agents for certain payments to non-financial foreign entities (NFFEs). It’s important to note that registration is typically required even if the FFI does not have U.S. account holders.
This publication is distributed for informational purposes only, with the understanding that Doeren Mayhew is not rendering legal, accounting, or other professional opinions on specific facts for matters, and, accordingly, assumes no liability whatsoever in connection with its use. Should the reader have any questions regarding any of the news articles, it is recommended that a Doeren Mayhew representative be contacted.
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