On 10 June 2015, the IRS issued an announcement reminding taxpayers with a Report of Foreign Bank and Financial Accounts (FBAR) filing requirement that they should report their foreign assets by 30 June 2015 (Link). More precisely, FBAR concerns taxpayers who have an interest in, or signature or other authority over foreign financial accounts whose value exceeded $10,000 at any moment during 2014. These taxpayers have an obligation to file Form 114 directly to the Financial Crimes Enforcement Network (FinCEN). Form 114 is available online through the BSA E-Filing System website and can only be submitted electronically.
In the same announcement, taxpayers living abroad are also reminded that they may have an obligation to file FATCA Form 8938 (Statement of Special Foreign Financial Assets) with their tax return by 15 June 2015.
On 9 June, the IRS issued an alert stating that there is an error in the FATCA XML Schema Best Practices web page related to the inclusion of entity references in FATCA XML documents. To prevent file error notifications, the IRS requests that files do not include any of the characters mentioned in the FATCA XML Schema Best Practices web page (Link). The IRS further recommends that filers review the corrected FATCA IDES Technical FAQs C16 and C17 (Link). The FATCA XML schema reference documents will be updated to include these restrictions.
On 9 June, the IRS announced that publication of several FATCA IDES frequently asked questions (FAQs). The FATCA IDES Technical FAQs (Link) are focused on IDES technical issues such as data transmission and security.
The Swiss Federal Council issued a press release on 5 June 2015 (Link) calling for enhanced due diligence requirements in order to prevent the inflow of untaxed assets. These requirements should apply with regard to clients resident in countries where the future agreements on the Automatic Exchange of Financial Account Information do not apply. They will not apply in relation to clients resident in countries that have signed a Multilateral competent authority agreement (MCAA) with Switzerland. US clients are also included as FATCA is considered to effectively have an MCAA. These due diligence requirements are not applicable to clients who are resident in Switzerland for tax purposes.
For all other clients, a risk-based assessment should be conducted by financial intermediaries when accepting assets in order to effectively determine whether these assets have been duly taxed. The supervisory authorities and the recognized self-regulatory organization will determine in due time the details of the risk-based assessment. In brief, in cases where a risk-based assessment leads to the assumption that the offered assets are untaxed, the financial intermediaries should reject the business relationship if it is a new client. For preexisting clients, if the client offers untaxed assets, this creates the suspicion that the preexisting assets are also untaxed. The financial intermediary shall request proof of tax compliance or regularization of the situation. If none of this takes place in the allocated timeframe the business relations with this client shall be ended unless the proof of tax compliance is impossible to obtain or regularizing the situation is liable to create “unreasonable adverse effects”.
On 4 June 2015, seven more countries joined the multilateral agreement implementing the standard on automatic exchange of tax information (Link). Australia, Canada, Chile, Costa Rica, India, Indonesia and New Zealand are the latest countries to join the Multilateral competent authority agreement (Link), raising the total number of signatory countries to 61 (Link).
Under FATCA certain US withholding agents, foreign financial institutions, and non-financial foreign entities, are required to file Form 8966 (Link), FATCA Report, using the International Data Exchange Service (IDES) provided by the IRS. The original due date for filing the 2014 Form 8966 was 31 March 2015. For calendar year 2014 reporting only: The IRS provided an automatic 90-day extension of time to file Form 8966 to all filers extending the deadline until 29 June 2015. Filers can now request a second automatic 90-day extension by completing the Request for Additional Extension of Time to File Form 8966 for Tax Year 2014 (Link). If a filer is unable to electronically file Form 8966 as a result of an undue hardship, a request to file Form 8966 on paper can be made by submitting the template Request for Waiver from Filing Form 8966 Electronically for Tax Year 2014. Both requests can be mailed together (Link).
Link to PwC Tax Insights
The Italian law ratifying the Intergovernmental Agreement between Italy and the United States of America aimed at improving international tax compliance and implementing FATCA has been approved on 3 June 2015 by the Italian Parliament (Link-Italian). It will enter into force after its publication in the Italian Official Journal (date not yet provided).
The International Tax Authority of the Ministry of Finance, Government of the Virgin Islands, announced on 1 June 2015 the extension of FATCA deadlines for the United Kingdom and United States of America for BVI Financial Institutions with regard to their enrollment and reporting obligations (Link). The deadline to register or enroll with the BVI Tax Authority via the BVI Financial Account Reporting System (BVIFARS) has been extended to 30 June 2015 while the deadline to file reports has been extended to 31 July 2015. According to the press release, this relaxed approach only applies for 2015 in order to allow BVI Financial Institutions to “ensure that they complete their customer due diligence and comply with the Agreements”. Further, BVI financial institutions wishing to offer the Alternative Reporting Regime to their clients now have until 30 September to submit an election to the International Tax Authority.
IDES opens for testing from Monday, 1 June 2015 at 12:00 EDT (UTC/GMT-4) to Monday, 8 June 2015 at 12:00 EDT. The test session will be open to users that have completed IDES enrollment (Link) by Thursday, 28 May 2015 at 5:00 PM EDT. Note: Use test data only. The test files should not contain any production data or personally identifiable information, such as a valid taxpayer number, account number, or social security number. Any production files submitted to the test environment will not be processed. Do not submit production files to the test environment or test files to the production environment.
The IRS has recently announced that the Internal Data Exchange Service (IDES) now accepts the IdenTrust™ FATCA Organization Certificate (Link). IdenTrust developed a new digital certificate product specifically designed as a non-SSL organization certificate. You have the option to select from the two IRS-approved IdenTrust products:
- Organization (non-SSL) Certificate
- TrustID SSL Certificate
For more information regarding this, the IRS provides additional information on digital certificates the IDES Resources page (Link).