FATCA Withholding

Summary

This practice note discusses the withholding tax implications of the Foreign Account Tax Compliance Act (FATCA). This practice note addresses non-financial foreign entities (NFFEs), who exist as part of the FATCA compliance process. The IRS’s enforcement focus in recent years has been on U.S. persons holding interests in NFFEs whose principal assets generate passive income. The rules require that NFFEs perform appropriate due diligence to report substantial U.S. owners or certify that they have no U.S. ownership. They must also certify that they have an active business or are publicly traded. This practice note includes an analysis of the registration and withholding tax forms necessary to comply with FATCA such as Internal Revenue Service Forms 8966, 8957, 1042-S, 1042, and 1042-T. For more information on this topic, see What Is FATCA?