n-13-43.pdf

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Revised Timeline and Other Guidance Regarding the Implementation of
FATCA

Notice 2013-43

I. PURPOSE
This notice provides: (i) revised timelines for implementation of the
requirements of sections 1471 through 1474 of the Internal Revenue Code
(Code), commonly referred to as the Foreign Account Tax Compliance Act, or
FATCA; and (ii) additional guidance concerning the treatment of financial
institutions located in jurisdictions that have signed intergovernmental
agreements for the implementation of FATCA (IGAs) but have not yet brought
those IGAs into force. The Department of the Treasury (Treasury) and the
Internal Revenue Service (IRS) intend to amend the regulations under sections
1471 through 1474 to adopt these rules. Prior to the issuance of those
amendments, taxpayers may rely on the provisions of this notice regarding
expected amendments to the regulations.
II. BACKGROUND
A. FATCA Regulations
On March 18, 2010, the Hiring Incentives to Restore Employment Act of
2010, Pub. L. 111-147 (H.R. 2847), added chapter 4 (sections 1471 through
1474) to Subtitle A of the Code. Chapter 4 requires withholding agents to
withhold 30 percent of certain payments to a foreign financial institution (FFI)
unless the FFI has entered into an agreement (FFI agreement) with the IRS to,
among other things, report certain information with respect to U.S. accounts.
Chapter 4 also imposes on withholding agents certain withholding,

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documentation, and reporting requirements with respect to certain payments
made to certain non-financial foreign entities (NFFEs).
On February 15, 2012, Treasury and the IRS published proposed
regulations under chapter 4 in the Federal Register (REG-121647-10, 77 Fed.
Reg. 9022) (proposed regulations). On January 17, 2013, Treasury and the IRS
published final regulations under chapter 4 (TD 9610, 78 Fed. Reg. 5873) (final
regulations). The final regulations provided for a phased implementation of the
requirements of FATCA, beginning on January 1, 2014, and continuing through
2017. In particular, the final regulations provided that withholding agents
(including participating FFIs (PFFIs), qualified intermediaries (QIs) that assume
withholding responsibility, withholding foreign partnerships (WPs), and
withholding foreign trusts (WTs)) would be required to begin withholding with
respect to withholdable payments made after December 31, 2013 (with an
exception for “grandfathered obligations” outstanding on January 1, 2014, and
associated collateral). Due diligence for documenting payees and account
holders by U.S. withholding agents and PFFIs would be phased in during 2014
and 2015. Annual reporting by PFFIs would be phased in starting in 2015 (with
respect to information related to the 2013 and 2014 calendar years), with
reporting of the full scope of FATCA information required beginning in 2017.
B. Model IGAs
On July 26, 2012, Treasury released a model (Model 1) for bilateral
agreements with other jurisdictions (in both reciprocal and nonreciprocal
versions) under which FFIs (reporting Model 1 FFIs) would satisfy their chapter 4

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requirements by reporting information about U.S. accounts to their respective tax
authorities, followed by the automatic exchange of that information on a
government-to-government basis with the United States. On November 14,
2012, Treasury released a second model agreement (Model 2), under which FFIs
(reporting Model 2 FFIs) would report specified information directly to the IRS in
a manner consistent with the final regulations, supplemented by government-to-
government exchange of information on request. Treasury has concluded a
number of bilateral IGAs based on the model agreements (Model 1 IGAs and
Model 2 IGAs, respectively). Treasury has periodically updated the model IGAs
since their initial release, including an update to both model IGAs on May 9,
2013, to incorporate certain modifications arrived at through intergovernmental
discussions, as well as modifications to the due diligence procedures to reflect
improvements adopted in the final regulations following the initial release of the
model IGAs.
The model IGAs outline time frames for FFIs in jurisdictions with IGAs in
force (partner jurisdictions) to complete the necessary due diligence to identify
U.S. accounts and to perform reporting on U.S. accounts that are identified. The
timelines and other provisions contained in the model IGAs interact with the final
regulations in various ways. The model IGAs, and all IGAs that have been
concluded to date, contain a provision, colloquially referred to as the “most-
favored nation” provision, providing that, with respect to certain terms of the IGA,
including the due diligence rules applicable to reporting Model 1 FFIs and
reporting Model 2 FFIs, a partner jurisdiction is entitled to the benefit of any more

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favorable provision agreed to in a comparable IGA with another partner
jurisdiction, subject to certain conditions. Model 1 IGAs and Model 2 IGAs also
contain a coordination provision providing that a partner jurisdiction may permit
its FFIs to use a definition in the relevant U.S. Treasury Regulations in lieu of a
corresponding definition in the IGA, provided that such application would not
frustrate the purposes of the IGA. With respect to the due diligence procedures,
Model 1 IGAs and Model 2 IGAs provide that a partner jurisdiction may permit its
FFIs to apply the due diligence procedures described in the relevant U.S.
Treasury Regulations in lieu of the due diligence procedures in the IGA to
establish the status of account holders and payees. In addition, paragraph 6 of
Article 4 of the Model 1 IGA coordinates the time by which the parties must
obtain and exchange information with the time by which PFFIs must report
similar information to the IRS under the relevant U.S. Treasury Regulations.
C. Registration Process
In the preamble to the final regulations, Treasury and the IRS announced
their intent to create a FATCA registration website, which would serve as the
primary way for FFIs to interact with the IRS to complete the required
registration, agreements, and certifications. The preamble stated that the
FATCA registration website would be accessible to FFIs no later than July 15,
2013. After approval of its registration, each PFFI and registered deemed-
compliant FFI would be assigned a global intermediary identification number
(GIIN), which would be used both for reporting purposes and to identify the FFI’s
status to withholding agents. The preamble provided that the IRS would

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electronically post the first list of PFFIs and registered deemed-compliant FFIs
(IRS FFI List) on December 2, 2013, and would update the list on a monthly
basis. To ensure inclusion on the December 2013 IRS FFI List, FFIs would need
to register by October 25, 2013.
D. Modification of Phased Timeline for Implementation
Comments have indicated that certain elements of the phased timeline for
the implementation of FATCA present practical problems for both U.S.
withholding agents and FFIs. In addition, while comments from FFIs
overwhelmingly supported the development of IGAs as a solution to the legal
conflicts that might otherwise impede compliance with FATCA and as a more
effective and efficient way to implement cross-border tax information reporting,
some comments noted that, in the short term, continued uncertainty about
whether an IGA will be in effect in a particular jurisdiction hinders the ability of
FFIs and withholding agents to complete due diligence and other implementation
procedures. In consideration of these comments, and to allow for a more orderly
implementation of FATCA, Treasury and the IRS intend to amend the final
regulations to postpone by six months the start of FATCA withholding, and to
make corresponding adjustments to various other time frames provided in the
final regulations, as described in section III below.
In addition, as described in section IV below, Treasury and the IRS intend to
provide a list of jurisdictions that will be treated as having in effect an IGA, even
though that IGA may not have entered into force as of July 1, 2014.
Unless otherwise defined, terms used in this notice have the meanings set

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forth in the final regulations.
III. REVISED FATCA IMPLEMENTATION TIMELINE
A. Timeline for Withholding
Withholding agents generally will be required to begin withholding on
withholdable payments made after June 30, 2014, to payees that are FFIs or
NFFEs with respect to obligations that are not grandfathered obligations, unless
the payments can be reliably associated with documentation on which the
withholding agent can rely to treat the payments as exempt from withholding.
The definition of grandfathered obligation will be revised to include obligations
outstanding on July 1, 2014 (and associated collateral). This notice does not
affect the timing provided in the final regulations for withholding on gross
proceeds, passthru payments, and payments of U.S. source FDAP with respect
to offshore obligations by persons not acting in an intermediary capacity.
B. Timeline for Implementing New Account Opening Procedures and
the Definition of Preexisting Obligations
Withholding agents generally will be required to implement new account
opening procedures by July 1, 2014, or, in the case of a PFFI, by the later of July
1, 2014 or the effective date of its FFI agreement. Accordingly, the definition of
the term “preexisting obligation” will be modified to mean:
• With respect to a withholding agent other than a PFFI or a registered
deemed-compliant FFI: any account, instrument, or contract maintained,
executed, or issued by the withholding agent that is outstanding on June
30, 2014;

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• With respect to a PFFI: any account, instrument, or contract maintained,
executed, or issued by the PFFI that is outstanding on the effective date of
the FFI agreement; and
• With respect to a registered deemed-compliant FFI: any account,
instrument, or contract maintained, executed or issued by the FFI prior to
the later of July 1, 2014, or the date on which the FFI registers as a
deemed-compliant FFI and receives a GIIN.
Treasury intends to include a similar change to the definition of the term
“Preexisting Account” in both model IGAs. Thus, it is expected that future IGAs
will define the term “Preexisting Account” to mean a Financial Account
maintained as of June 30, 2014. For IGAs in force that contain the previous
definition of the term “Preexisting Account,” the partner jurisdiction will be
permitted under the coordination provision of the IGA to permit its FFIs to
substitute the definition of the term “preexisting account” from the amended final
regulations for the definition of the term “Preexisting Account” in the IGA. For
IGAs concluded before the coordination provision was added, the coordination
provision will apply through the operation of the most-favored nation provision
once an IGA containing the coordination provision is in force.
C. Transition Rules for Completing Due Diligence on Preexisting
Obligations
The FFI Agreement of a PFFI that registers and receives a GIIN from the
IRS on or before June 30, 2014, will have an effective date of June 30, 2014,
effectively resulting in a six-month postponement of the deadlines for completing

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due diligence on preexisting obligations. For withholding agents other than
PFFIs, the deadlines for completing due diligence on preexisting obligations will
be postponed by six months. Thus, for example, a withholding agent other than
a PFFI will be required to document payees that are prima facie FFIs by
December 31, 2014, instead of by June 30, 2014.
Account balance or value will be measured initially as of June 30, 2014,
for purposes of determining whether an account is exempt from review, subject
only to an electronic search for indicia, or subject to enhanced review. An
account with a balance or value that was initially $1,000,000 or below, and with
respect to which there has been no change in circumstances, will not be subject
to enhanced review unless the account balance or value exceeds $1,000,000 as
of the end of 2015 or any subsequent calendar year. Thus, the obligation to
monitor the account balance or value of preexisting accounts to determine
whether enhanced review is required is deferred by one year.
Treasury intends to provide for a similar six-month delay in the due
diligence procedures included in Annex I of IGAs concluded after the issuance of
this notice, which will generally apply automatically to previously-signed IGAs
through the operation of the most-favored nation provision in those IGAs once
those later signed agreements are in force.
D. Due Date for First Report of a PFFI with respect to U.S. Accounts
The final regulations provide that a PFFI will be required to file information
reports on its U.S. accounts with respect to the 2013 and 2014 calendar years no
later than March 31, 2015. Treasury and the IRS intend to modify these rules to

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require reporting on March 31, 2015, only with respect to the 2014 calendar year
(for U.S. accounts identified by December 31, 2014). Through the operation of
paragraph 6 of Article 4 of the Model 1 IGAs, this modification to the required
reporting will apply automatically in the context of Model 1 IGAs as well. For
IGAs concluded before paragraph 6 of Article 4 was added, the rules of
paragraph 6 of Article 4 will apply through the operation of the most-favored
nation provision once an IGA containing paragraph 6 of Article 4 is in force. As a
result, once an IGA containing paragraph 6 of Article 4 is in force, partner
jurisdictions will not be obligated to obtain and exchange information with respect
to the 2013 calendar year. Instead, the information exchanged by partner
jurisdictions in 2015 will be required to include only information related to the
2014 calendar year.
E. Timeline For Registration
The FATCA registration website is projected to be accessible to financial
institutions on August 19, 2013. Other key dates for registration, however, will be
extended by six months. Thus, after the FATCA registration website opens, a
financial institution will be able to begin the process of registering by creating an
account and inputting the required information for itself, for its branch operations,
and, if it serves as a “lead” financial institution, for other members of its expanded
affiliated group. All input information will be saved automatically in the
registration system and associated with the financial institution’s account. For
the period from the opening of the FATCA registration website through
December 31, 2013, a financial institution will be able to access its account to

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modify or add registration information, including to indicate the appropriate
registration status, as such status is established, for example, by the signing of
an IGA. Prior to January 1, 2014, however, any information entered into the
system, even if submitted as final, will not be regarded as a final submission, but
will merely be stored until the information is submitted as final on or after January
1, 2014. Thus, financial institutions can use the remainder of 2013 to get familiar
with the registration process, to input preliminary information, and to refine that
information. On or after January 1, 2014, each financial institution will be
expected to finalize its registration information by logging into its account on the
FATCA registration website, making any necessary additional changes, and
submitting the information as final.
Consistent with this 6-month extension, the IRS will not issue any GIINs in
2013. Instead it expects to begin issuing GIINs as registrations are finalized in
2014. The IRS will electronically post the first IRS FFI List by June 2, 2014, and
will update the list on a monthly basis thereafter. To ensure inclusion in the June
2014 IRS FFI List, FFIs would need to finalize their registration by April 25, 2014.
As provided in the final regulations, subject to certain exceptions for
preexisting obligations and for offshore obligations, a withholding agent generally
may treat a payee as a PFFI or registered deemed-compliant FFI only if the
withholding agent has a withholding certificate identifying the payee as a PFFI or
registered deemed-compliant FFI and verifies the GIIN contained on that
withholding certificate against the IRS FFI List. For payments made prior to
January 1, 2015, however, verification of a GIIN is not required with respect to

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payees that are reporting Model 1 FFIs. This provision will continue to apply
following the changes described in this notice. As a result, while reporting Model
1 FFIs will be able to register and obtain GIINs beginning on January 1, 2014,
they will have additional time beyond July 1, 2014, to register and obtain a GIIN
in order to ensure that they are included on the IRS FFI list before January 1,
2015.
F. Treatment of Expiring Chapter 3 Documentation
For purposes of chapter 3 withholding, withholding certificates and
documentary evidence generally expire on the last day of the third calendar year
following the year in which the withholding certificate is signed or the
documentary evidence is provided to the withholding agent. Withholding
certificates and documentary evidence that would otherwise expire on December
31, 2013, will expire instead on June 30, 2014, unless a change in circumstances
occurs that would otherwise render the withholding certificate or documentary
evidence incorrect or unreliable.
G. Automatic Extension of Expiring QI, WP, and WT Agreements
All QI, WP, or WT agreements that would otherwise expire on December
31, 2013, will be automatically extended until June 30, 2014.
H. Extension of Foreign-Targeted Registered Obligation Rules
Notice 2012-20 provided as a limited transition rule that a withholding
agent paying interest on an obligation issued in registered form after March 18,
2012, and before January 1, 2014, may apply the foreign-targeted registered
obligation rules of §1.871-14(e) if the obligation satisfies the requirements of

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those rules. The end of this transition period was intended to coincide with the
implementation of the chapter 4 rules. As a result, this transition rule will be
extended to obligations issued in registered form after March 18, 2012 and
before July 1, 2014.
IV. Treatment of Financial Institutions Operating in Jurisdictions That Have
Signed an Intergovernmental Agreement to Implement FATCA
A jurisdiction will be treated as having in effect an IGA if the jurisdiction is
listed on the Treasury website as a jurisdiction that is treated as having an IGA in
effect. In general, Treasury and the IRS intend to include on this list jurisdictions
that have signed but have not yet brought into force an IGA. The list of
jurisdictions that are treated as having an IGA in effect is available at the
following address:
http://www.treasury.gov/resource-center/tax-policy/treaties/Pages/FATCA-
Archive.aspx.
A financial institution resident in a jurisdiction that is treated as having an
IGA in effect will be permitted to register on the FATCA registration website as a
registered deemed-compliant FFI (which would include all reporting Model 1
FFIs) or PFFI (which would include all reporting Model 2 FFIs), as applicable. In
addition, a financial institution may designate a branch located in such jurisdiction
as not a limited branch. A jurisdiction may be removed from the list of
jurisdictions that are treated as having an IGA in effect if the jurisdiction fails to
perform the steps necessary to bring the IGA into force within a reasonable
period of time. If a jurisdiction is removed from the list, financial institutions that

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are residents of that jurisdiction, and branches that are located in that jurisdiction,
will no longer be entitled to the status that would be provided under the IGA, and
must update their status on the FATCA registration website accordingly.
DRAFTING INFORMATION
The principal author of this notice is Tara Ferris of the Office of Associate
Chief Counsel (International). For further information regarding this notice,
contact John Sweeney at (202) 622-3840 (not a toll-free call).