Montenegro has shown its commitment to improving compliance with international tax standards. The Foreign Account Tax Compliance Act (FATCA) agreement is yet another example of a set of steps taken towards broadening the cooperation between the US and Montenegro and following the international standards of cross-border tax assistance.
The US Ambassador Margaret Ann Uyehara and Montenegrin Minister of Finance Darko Radunovic, signed the intergovernmental agreement (IGA) on June 2 2017 to implement the FATCA provisions and to promote tax transparency between the two nations. The agreement underscores the continued cooperation and strong bilateral relationship between Montenegro and the US, as well as the growing international cooperation aimed at curbing tax evasion.
The agreement with the US on the implementation of FATCA regulations aims at preventing tax evasion by US citizens and related individuals holding accounts in Montenegrin banks. Montenegro, in accordance with the agreement, gathers information in relation such persons and automatically exchanges this information once a year with the US.
There are two potential models for such an exchange, as discussed below:
- Ensuring all financial institutions register and conclude individual contracts with the US Internal Revenue Service (IRS);
- Concluding a bilateral agreement between the Montenegrin government and the US government, with the possibility of choosing between two sub-modules: either all financial institutions will submit data to the competent authority of Montenegro which will the forward it to the IRS; or financial institutions shall submit data to the IRS on their own.
It was found that the first model would not be acceptable for Montenegro, due to the existence of a legal limitation for banks to submit confidential banking (Article 84 of the Law on Banks), i.e. banning the provision of information to third parties on transfers of funds to clients without their written consent. Therefore, the second model has been selected.
On the basis of the concluded agreement, Montenegro will now be obliged to collect information and to inform and exchange annually the name, address, and US public information bulletin of each designated person owning an account in reporting Montenegrin institutions.
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