On 12 July 2013, the US Internal Revenue Service issued a revised timeline for the implementation of the requirements of sections 1471 to 1474 of the Internal Revenue Code, commonly referred to as FATCA.


  • The implementation of FATCA withholding on US source income has been delayed by six months and will now commence on 1 July 2014 (rather than 1 January 2014).
  • The grandfathering period for FATCA withholding on US source income has also be extended by six months to 30 June 2014.
  • A number of other key starting dates for FATCA reporting and compliance obligations have also been extended, though the notice does not affect the timing for implementation of FATCA withholding on gross proceeds or passthru payments, which remains scheduled to take effect on 1 January 2017.

Principal Effects

  • Financings, derivative transactions and other similar arrangements that are entered into prior to 1 July 2014 will not be subject to FATCA withholding regardless of the status or jurisdiction of the parties, in the same way as previously applied to arrangements entered into prior to 1 January 2014 only.
  • However, as before, a “significant modification” of the relevant arrangement on or after 1 July 2014 could cause the grandfathering protection to be lost, and therefore careful consideration of FATCA provisions remains important in such arrangements.

For further detail on this development and a general overview of the impact of FATCA on Middle East transactions, please click here to view a presentation Latham hosted on 25 July 2013.

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