Taiwan tries to catch up with FATCA
Taiwan could be the latest country to come to an agreement with the US over the implementation of the Foreign Account Tax Compliance Act (FATCA).
However, it may not be a straightforward process as it does not have a double tax treaty with the US, which has been key to the information exchange provisions of cooperation America has discussed with other countries.
Previously, Taiwanese banks were thought to have reacted slowly to the introduction of FATCA.
“There hasn't been much emphasis on it so far,” a risk officer at a Taiwanese bank told Thomson Reuters in December last year. “Most institutions in Taiwan take the view that their businesses are not so internationalised and that they do not have many US clients, hence they think that FATCA will probably not affect them too much. They feel that as long as they don't take on any US clients, they will be ok.”
Reports suggest this was because Taiwanese banks felt the state’s banking secrecy legislation meant they did not have to be compliant with FATCA.
However, Taiwan Economic News is reporting that the authorities believe an agreement is required and a joint taskforce from the Financial Supervisory Commission and the Ministry of Finance will try to sign a bilateral one with the US to reduce the compliance burden for Taiwanese banks.
Seven jurisdictions – France, Germany, Italy, Japan, Spain, Switzerland and the UK - have already announced that they are also discussing bilateral agreements to implement FATCA locally, which would allow so-called foreign financial institutions (FFIs) report information about their US clients to their home tax authorities rather than directly to the Internal Revenue Service (IRS) in Washington, DC.
Other countries, such as Jamaica, have said they are interested in having an agreement with the US on FATCA implementation as well. And investors in Canada are urging their government to negotiate something similar.
The law, which was passed in 2010 and will be phased in from January 1 2013, will require FFIs to report to the IRS about their US taxpayer-held accounts. Otherwise, the institutions and accountholders deemed non-compliant face a 30% withholding tax on certain payments such as US source interest and dividends.