The Protocol offers market participants an efficient way to amend the ISDA Master Agreement tax provisions to address the effects of the Foreign Account Tax Compliance Act (FATCA), which may impose a withholding tax on payments under derivatives transactions.

FATCA was enacted as part of the Hiring Incentives to Restore Employment (HIRE) Act of March 2010. The intent behind FATCA is to help the US Internal Revenue Service "combat tax evasion by US persons holding investments in offshore accounts." FATCA imposes a 30 percent withholding tax on an expansive list of payments to non-participating foreign financial institutions and other payees that are not FATCA compliant.

The impact of the Protocol is to place the FATCA withholding tax burden on the recipient of the payment by eliminating this tax from the definition of "Indemnifiable Tax" in the ISDA Master Agreement. The rationale is that the recipient is the sole party that has the ability to avoid the withholding tax by complying with the FATCA rules; therefore, the recipient should be the party burdened with the FATCA withholding tax if it chooses to not comply.

The Protocol is open for adherence as of August 15, 2012 and is open to ISDA members and non-members alike. The text of the Protocol and a link to adhere to the Protocol as well as guidance on the mechanics of the Protocol, answers to frequently asked questions and details on adherents, are available on theProtocol Management section of ISDA's website.

Additional information regarding FATCA, including answers to frequently asked questions and ISDA FATCA Market Education Note on the US Foreign Account Tax Compliance Act is available on the FATCA section of ISDA's website.