The US Treasury Department said it will postpone enforcement of a new law that cracks down on offshore tax avoidance by Americans by six months until July 1, 2014, giving foreign banks more time to determine how to comply.
The Foreign Account Tax Compliance Act, or FATCA, requires foreign banks and other institutions to supply information to the U.S. Internal Revenue Service about Americans’ offshore accounts worth more than $50,000.
The law, approved by Congress in 2010, stipulates that foreign financial institutions that fail to comply can effectively be frozen out of U.S. capital markets.
Since the law was passed, foreign banks and other businesses have complained about the costs of FATCA and its scope, saying in some cases that it conflicts with home-country banking laws that shield account holder information.
To help banks in countries with legal issues, Treasury and the IRS have been working on agreements that will let the home-country governments of foreign banks act as information-disclosing intermediaries to deal with the IRS.
“We are providing an additional six months to complete agreements with countries and jurisdictions across the globe,” said Robert Stack, Treasury deputy assistant secretary for international tax affairs, in a statement.
The United States has finalized intergovernmental agreements for FATCA compliance with Germany, Spain, Norway, Switzerland, Ireland, Mexico, Denmark and the United Kingdom. Dozens more of these pacts are in negotiation.
A new registration website for banks to sign up with the IRS and ensure they are complying with FATCA is now set to open on Aug. 19, the US Treasury said in its statement. The portal had previously been scheduled to open this week.