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Treasury Releases Final Regulations on FATCA



by Cecelia Philipps Horner
Hunton & Williams LLP - Richmond Office

George C. Howell
Hunton & Williams LLP - Richmond Office

Kendal Aylor Sibley
Hunton & Williams LLP - Richmond Office

B. Cary Tolley
Hunton & Williams LLP - Miami Office

January 28, 2013

Previously published on January 2013

On January 17, 2013, the Treasury Department (“Treasury”) and the Internal Revenue Service (“IRS”) issued final regulations with respect to the Foreign Account Tax Compliance Act (“FATCA”). The legislation applies to payments to foreign financial institutions (“FFIs”) and nonfinancial foreign entities (“NFFEs”). In general, FATCA requires certain persons making payments to FFIs and NFFEs to withhold 30 percent of any payment (a “Withholdable Payment”) consisting of either (1) U.S. source periodic income (“Income Payments”), such as interest, dividends and rents or (2) gross proceeds from the sale of property that could produce Income Payments (“Proceeds Payments”), which includes principal payments on debt obligations. A FFI can avoid this withholding, however, if it enters into an agreement (a “FFI Agreement”) with the IRS to become a participating FFI (a “PFFI”) or is otherwise deemed compliant or exempt. FATCA also requires 30 percent withholding on any Withholdable Payment made to a NFFE, unless the NFFE either provides a U.S. beneficial ownership disclosure or is exempt.


 

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