NAPF Calls for Clarity on FACTA
30 April 2012 (PLANSPONSOREurope.com) – The US Internal Revenue Service (IRS) should make it crystal clear that workplace pensions will be exempt from the Foreign Account Tax Compliance Act (FATCA) to avoid creating confusion among UK pension schemes, according to the National Association of Pension Funds (NAPF).
In its response to the IRS consultation on the proposed US Treasury FATCA regulations, the NAPF welcomed the IRS’ intention to exempt retirement plans from the new regulations but warned that the exclusion for schemes as currently outlined in the proposals is not clear enough, and could create uncertainty among pension schemes.
Darren Philp, NAPF Policy Director, said:
“We are very pleased that pension funds will be exempt from the new regulation and that the IRS listened to our concerns. Without such an exemption, pension funds would have been required to set up systems to identify the benefits accrued by U.S. nationals and to tell the IRS about them. This would have been extremely costly for pension funds and completely unworkable.
“However, we are concerned that this exemption is not yet absolutely clear. This could cause confusion among schemes which could, one day, face the possibility of having to comply with the new law. We urge the IRS to ensure the exclusion for pension funds is watertight.”
Under original proposals, ‘foreign financial institutions’ would have been required to monitor and report to the IRS the details of US citizens to identify potential tax evaders. And a 30% withholding tax would have been imposed on the US assets of any institution that failed to comply.