FATCA and R&D Tax Credits

Foreign Account Tax Compliance Act (FATCA) proposed regulations, released on Feb. 8, 2012, by the U.S. Department of Treasury and the Internal Revenue Service, create significant business and technological challenges. Many organizations anticipate that compliance costs may exceed US$100 million.

Country-specific data-privacy requirements and disparate technology platforms provide little or no customer information transparency. Information technology (IT) development in this area is, therefore, likely to give rise to activities that could be qualifying research expenditures, attracting R&D tax credits, which if undertaken in the United States, can be up to 10 percent of the development spend. Furthermore, as a global phenomenon, R&D incentives are available in many countries where eligible IT development is incurred.

Many companies have not factored into their development plans the significant benefits potentially available that will boost return on investment. This article examines whether spend on information technology development in response to FATCA regulations would be potentially eligible for R&D tax incentives in some countries.