The US Internal Revenue Service (IRS) has delayed the timelines for withholding agents and foreign banks to complete the due-diligence requirements included in the Foreign Account Tax Compliance Act (FATCA).

The requirements were included as part of the Hiring Incentives to Restore Employment (HIRE) Act of 2010. Under the rules, foreign financial institutions (FFI) are required to report on the holdings of U.S. taxpayers to the IRS, which has drawn criticism from foreign banks, dual citizens and expatriates.

In Announcement 2012-42, the IRS said that FFIs will have until 1 January 2017, to start withholding taxes from US taxpayers' investment gains and until 1 January 2014, to implement FATCA-mandated reporting requirements.

The announcement also provides guidance concerning gross proceeds withholding and the status of certain instruments as grandfathered obligations under sections 1471-1474 of the US Tax Code, which were added to the Code under the HIRE Act. The IRS and the US Treasury Department intend to incorporate the rules in final regulations.

The UK government signed an agreement with the US in September 2012 to improve international tax compliance and implement FATCA.

Further information on the changes to the timetable is available from the IRS website.