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U.S. financial institutions and the foreign entities to which
they make certain U.S. source payments will face new tax
compliance challenges under FATCA. The effective date for
this new regime is Jan. 1, 2013.
mplementation will take between 18-24 months.
“It may appear that there is ample time to adequately
prepare for the 2013 statutory effective date, but CFOs
and tax directors should be aware that most U.S. financial
institutions and foreign financial institutions have concluded
that implementation will take between 18-24 months,” said
Mark Price, KPMG’s Banking and Finance practice national
tax leader. “The account identification, withholding, and
reporting requirements under this new regime will affect
all disciplines and processes—from IT and operations to
the tax and regulatory departments. Given that we won’t
have definitive rules for some time, affected entities need
to secure upper management buy-in as soon as possible to
ensure adequate resources are made available for planning
purposes.”
Equally important, according to KPMG Washington National
Tax principal Laurie Hatten-Boyd, this new regime broadens
the definition of “foreign financial institution” far beyond a
traditional view, to include insurance companies that issue
cash value products, hedge funds, private equity funds, and
other collective investment vehicles.
“These nontraditional entities face additional burdens in their
attempt to be FATCA-compliant,” Hatten-Boyd said. ”Since
they currently do not have the same regulatory requirements
to obtain documentation under their local know your
customer or anti-money laundering rules, the starting point
for these entities is that all accounts are undocumented.
They need to start gathering the information and developing
the systems they will need to obtain, retain, and report the
required information to the authorities when the rules go
live.”
“Most of the provisions in the Dodd-Frank Act have
significant tax implications and it’s critical for CFOs, tax
directors and other executives to be aware of them,” said
Marcello.
