The legislation requires foreign financial institutions (FFIs) to enter into an agreement with the US to provide certain information about its US accountholders or pay a 30% withholding tax.
“Treasury’s engagement with this broad coalition of foreign governments to efficiently and effectively implement FATCA marks an important milestone in establishing a common intergovernmental approach to combating tax evasion,” the department said in a statementyesterday.
“Global cooperation is critical to implementing FATCA in a way that is targeted and efficient,” Mark Mazur, Treasury Assistant Secretary for Tax Policy, said. “By working cooperatively with foreign governments and financial institutions, we are intensifying our ability to combat tax evasion while minimising burdens on financial institutions.”
Some jurisdictions protested when the law was passed in 2010 that apart from the compliance burden FATCA imposed, local data privacy laws would not allow their financial institutions to report directly to the US authorities.
When Treasury and the Internal Revenue Service (IRS) published proposed final regulations last February, they and five other jurisdictions released a joint statement saying they were working on ways to implement FATCA locally.
And in July, Treasury published a model intergovernmental agreement for implementing FATCA and announced the development of a second model agreement. These will be the models for concluding bilateral agreements with interested jurisdictions.
Yesterday’s Treasury statement said the US is working with three different groups of countries on FATCA implementation:
· Those with whom it hopes to finalise intergovernmental agreements before the end of the year: France, Germany, Italy, Spain, Japan, Switzerland, Canada, Denmark, Finland, Guernsey, Ireland, Isle of Man, Jersey, Mexico, the Netherlands, and Norway.
· Those with whom it is actively engaged in a dialogue towards concluding an intergovernmental agreement: Argentina, Australia, Belgium, the Cayman Islands, Cyprus, Estonia, Hungary, Israel, Korea, Liechtenstein, Malaysia, Malta, New Zealand, the Slovak Republic, Singapore, and Sweden. Treasury expects to be able to conclude negotiations with several of these jurisdictions by year end; and
· Those jurisdictions with which Treasury is working to explore options for intergovernmental engagement: Bermuda, Brazil, the British Virgin Islands, Chile, the Czech Republic, Gibraltar, India, Lebanon, Luxembourg, Romania, Russia, Seychelles, Sint Maarten, Slovenia, and South Africa.
The UK became the first jurisdiction to sign a bilateral agreement with the US in September.
The Treasury Department said it will continue to try to work with interested jurisdictions that wish to consider an intergovernmental approach to implementing FATCA. US officials are participating in a meeting in Qatar in early December, which will be attended by senior government officials and financial institutions in the Gulf Cooperation Council, to provide information about FATCA and the intergovernmental agreements.
“Certainly, our end goal is a convention providing for the multilateral exchange of tax information globally, and the OECD and G20 are making important strides in that direction,” said Heather Lowe, legal counsel and director of government affairs at Global Financial Integrity, a US group that campaigns for measures to stop the cross-border flow of illegal money. “Still, Treasury’s work with regard to FATCA is a major milestone, and we are very pleased with the direction they’ve taken.”
