To maintain the protections from FATCA withholding tax provided by FATCA’s grandfathering provisions, qualifying debt instruments must not be materially modified after the end of the grandfathering period. For the purposes of FATCA, the term ‘material modification’ is defined by reference to pre-existing US tax regulations. These regulations have been in force for close to 20 years, and provide relatively clear guidance on when various modifications are considered significant enough to cause a deemed re-issuance of the debt for US tax purposes.
