Beginning July 1, 2014, U.S. taxpayers with accounts in multiple countries are now required to comply with an additional tax withholding and reporting regime known as FATCA: Foreign Account Tax Compliance Act.

FDAP Payments

FATCA requires U.S. payors to withhold 30 percent on U.S. source payments made to foreign entities when the payment is considered fixed, determinable, annual and periodic (FDAP).

Under FATCA, FDAP payments include:

• Interest

• Dividends

• Rents

• Royalties

• Annuities

• Insurance premiums on cash value insurance contracts

• Gross proceeds from the sale of assets that produce interest or dividends

• Payments in connection with a lending transaction, a forward, futures, option, or notional principal contract, investment advisory fees, custodial fees and bank or brokerage fees

Evaluate Withholding and Requirements

U.S. payors making FDAP payments to foreign entities should evaluate their FATCA withholding and reporting requirements. FATCA requires U.S. payors to request and review IRS form W-8BEN-E and report certain FATCA payments and FATCA withholding on IRS forms 1042 and 1042-S. This withholding and reporting is in addition to Internal Revenue Code Chapter 3 reporting and withholding (existing international backup withholding regime).