Will IDES March Forward?

The US IRS system being launched for Fatca compliance filing places new demands on firms seeking to comply with the foreign tax withholding law. Will the new system prove workable?

The launch by the US Internal Revenue Service (IRS) this week of its International Data Exchange Service (IDES) seems intended to address the complaints many in the industry had last year and in previous years that the IRS was not adequately defining what would be required for compliance with the US Foreign Account Tax Compliance Act (Fatca).

Preceding IDES’ debut, foreign financial institutions had to obtain a GIIN identification number by July 1, 2014 in countries without intergovernmental agreements (IGAs) with the US, and by January 1, 2015 in countries with IGAs. Next, firms will have to meet new annual reporting deadlines in March and May, raising the question of whether IDES will be easy enough to navigate and functional enough to allow that to happen.

Back in March, I asked if the IRS might have further adjustments to what had been a February deadline for having reporting processes and customer remediation in place, that would complicate matters. IDES does not reportedly include any such major changes to the substance of what firms must file and provide for Fatca compliance, so that appears settled now.

However, as Micah Willbrand, global director of anti-money laundering product marketing at NICE Acitimize points out, from a technological and operational perspective, the IDES rollout is likely to strain firms’ ability to meet the upcoming March and May deadlines.

The intent behind introducing IDES is to give firms a tool to meet the deadlines with the resources they have, as Willbrand sees it, but it could become trial-by-fire with the first-ever annual reporting cycle, using a new, untested system.