The US has issued comprehensive final regulations implementing the information reporting and withholding tax provisions under the Foreign Account Tax Compliance Act (FATCA).

The final regulations marks a key step in establishing a common intergovernmental approach to combating tax evasion.

These regulations provide additional certainty for financial institutions and government counterparts by finalising the step-by-step process for US account identification, information reporting, and withholding requirements for foreign financial institutions (FFIs), other foreign entities, and US withholding agents.

'These regulations give the administration a powerful set of tools to combat offshore tax evasion effectively and efficiently,' said deputy secretary Neal Wolin. 'The final rules mark a critical milestone in international cooperation on these issues, and they provide important clarity for foreign and US financial institutions.'

The final regulations include:

• Build on intergovernmental agreements that foster international cooperation.Phase in the timelines for due diligence, reporting and withholding and align them with the intergovernmental agreements. The final regulations phase in over an extended transition period
• Expand and clarify the scope of payments not subject to withholding. The final regulations provide relief from withholding with respect to certain grandfathered obligations and certain payments made by non-financial entities.Refine and clarify the treatment of investment entities.
• Clarify the compliance and verification obligations of FFIs.

Seven countries have already signed or initialled cross-border agreements to implement FATCA, including the UK, Mexico, Denmark, Ireland, Switzerland and Spain. Norway is the latest signatory, confirmed on 17 January.

Jennifer Sponzilli, KPMG US tax partner based in London, said: 'While the FATCA final regulations bring much needed certainty to global financial institutions, the implementation time frame remains challenging with the first effective date less than a year away.

'The FATCA final regulations confirm prior US government statements that debt instruments outstanding on 1 January 2014, or any agreement requiring a secured party to make a payment with respect to, or to repay, collateral posted to secure a grandfathered obligation, are indeed grandfathered from withholding.

'Thankfully for the investment management industry, the FATCA final regulations generally align the definition of an investment entity as a financial institution with that in the IGAs ("Inter-governmental agreements") and provide a centralised reporting option for fund managers.

'There is still no further clarity, however, with regard to whether the umbrella fund or each sub fund must register under the final regulations.'

Regulatory information on FATCA is available HERE