FATCA, the Foreign Account Tax Compliance Act, adds new reporting and withholding requirements for transactions with certain foreign entities. In general, there is a 30% withholding tax on payments of U.S. source FDAP income, such as interest and dividends, to foreign financial institutions. However, if the institution has entered into an agreement with the IRS to comply with various information, reporting and verification procedures, the withholding requirement would not apply to that institution. These rules also apply to certain nonfinancial foreign entites with any U.S. owners who hold over a 10% interest in the capital or profits of such entity. These new rules apply to payments after June 30, 2014. See IRS FATCA Current Alerts.

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