The Financial Times (FT) ran a story on Saturday 18 October about confusion over the Foreign Account tax Compliance Act (FATCA) deadline for trusts. Trustees of private family trusts are being urged to register with the US tax authority or risk non-compliance with new counter-tax avoidance legislation.
Investment-based trusts that are managed by a discretionary fund manager are considered, according to the US tax authority’s definitions, to be “financial institutions” and must therefore meet FATCA requirements.
The first step is to apply for a so-called “global intermediary identification number” or GIIN. Failure to meet Fatca’s reporting obligations could result in a 30 per cent withholding tax on income on behalf of the IRS.
Although experts offer differing interpretations of what trustees must do and by when; it’s certainly true that the US has provided no clear deadline for trusts that need to register with the IRS under a Model 1 IGA.
As the FT notes, the collective view of the three professional bodies, STEP, Law Society of England & Wales and ICAEW, that have produced joint guidance on FATCA for trustees is that, for those that need to, it would be prudent to ensure that the registration process on the IRS website is completed by October 25, 2014.
While the IRS registration system has performed well over the summer, the risk of last minute problems as Financial Institutions rush to register cannot be ruled out.
The late October recommendation is thus based on a cautious view, but we note that registration on the IRS website is not the end of the process.
The key requirement for trusts (or corporate trustees) who need to register is
that they appear on the published list of Financial Institutions by January 1, 2015.
There is a lag between registering on the IRS website and appearing on the published list.
Moreover, many trustees are now being asked to confirm their FATCA status by Financial Institutions they transact with. Clearly, as the end of the year approaches, these requests are likely to become ever more insistent.
Do You Have A FATCA Problem?
Contact the Tax Lawyers at
Marini & Associates, P.A.
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STEP FATCA Guidance
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