US Treasury Releases Regulations For Foreign Financial Institutions Under FATCA

On 8 February 2012 the US Treasury released regulations relating to the reporting and tax withholding requirements of Foreign Financial Institutions (FFIs) under the Foreign Account Tax Compliance Act (FATCA).

FATCA requires FFIs across the globe to report to the IRS on the US accounts they hold. Non-compliance with its requirements will result in a 30% withholding tax being applied to all US sourced income flowing into that FFI.

The regulations represent the most recent guidance provided on FATCA since its enactment in 2010. It has been hoped that they would provide some answers to the many questions and concerns raised by the previous guidance notes.

A chief concern amongst FFIs has been that compliance with FATCA provisions could trigger a breach of their local law. For instance, a direct report to the IRS of a client's personal account information is an almost certain breach of the Island's data protection law.