KPMG warns of compliance cost hit from US tax delay

KPMG has warned the slipping release dates of US tax regulatory papers will mean companies may not be able to plan properly and will rush through changes at an inflated cost to their business.

The Foreign Accounts Tax Compliance Act takes effect from 1 January 2013 and requires details of all US clients with assets of more than $50,000 (£32,116) in or outside of the US be passed to the country’s inland revenue service.

Adrian Harkin, global FATCA leader at KPMG, said the worse case scenario was firms could still not get it right and face 30 per cent withholding of payments received from the US, whether paid to a US person or not.

Mr Harkin said: “Many financial institutions feel they are being forced to sit on their hands with their FATCA preparation as they await further clarity on a number of issues such as passthru payments, the scope of financial accounts and the requirements of foreign financial institutions.

“Without the finer detail, it is difficult for them to plan properly. If the rumours are true - that guidance on passthru payments and the foreign financial institution agreement are excluded from the overdue regulation paper - banks, in particular, are likely to suffer.

“The current proposed regime applies to all payments made by a participating FFI and certain deemed complaint FFIs.

“The need to calculate a passthru payment percentage quarterly, using off balance sheet assets, would mean current platforms for sourcing assets would be obsolete for this purpose.

“In addition the scope of accounts including a current $50,000 de minimus threshold is onerous and account aggregation requirements are unclear.

“I encourage the IRS to engage more with the industry to fill in the blanks on this new regulation.”