Proposed regulations to implement FATCA were issued February 8, 2012 by the IRS. FATCA’s goal is to require foreign financial institutions (“FFI”s) and all other non-financial foreign entities (“NFFE”s) to provide information to the IRS identifying U.S. persons invested in non-U.S. banks and securities accounts.
To achieve this goal, FATCA imposes a new 30% withholding tax on U.S. source interest, dividends and gross proceeds from the disposition of any property of a type that can produce U.S. source interest or dividends. In order to avoid this withholding tax, FFIs will need to either become a so-called “participating FFI” by entering into a disclosure compliance agreement with the IRS or otherwise meet certain requirements set out in the proposed regulations.
