US To Cooperate With Switzerland, Japan On FATCA

US To Cooperate With Switzerland, Japan On FATCA: "The United States Department of the Treasury has jointly issued statements with Switzerland and Japan, expressing its intent to pursue frameworks with both countries for cooperation to facilitate the implementation of the Foreign Account Tax Compliance Act (FATCA), and improve international tax compliance based on their bilateral tax treaties.

The Treasury Department and the Internal Revenue Service (IRS) have issued proposed regulations for the next major phase of implementing the Foreign Account Tax Compliance Act (FATCA), which also includes a joint statement with France, Germany, Italy, Spain and the United Kingdom on a possible government-to-government framework for information exchange."

FATCA was enacted by Congress in March 2010 and is intended to ensure that the US tax authorities obtain information on financial accounts held by US taxpayers, or by foreign entities in which US taxpayers hold a substantial ownership interest, with foreign financial institutions (FFIs). Failure by an FFI to disclose information would result in a requirement to withhold 30% tax on US-source income.

While FFIs will be able to register through an online system that will become available by January 1, 2013, and institutions with US clients will be required to report basic account details for 2013 and 2014 by January 1, 2015, it is currently envisaged that the income of those clients will not need to be reported until January 1, 2016, with respect to calendar year 2015.

FFIs across the world (including banks, investment funds and insurance companies) have all expressed concern about the legislation, in particular the costs of compliance and penalties that will ensue in case of non-compliance.

When, in February this year, the Treasury and the IRS issued their latest version of the FATCA regulations, it was also announced that agreements with France, Germany, Italy, Spain and the UK to pursue government-to-government frameworks for implementing FATCA had been reached, as an important step toward addressing legal impediments to FFIs’ ability to comply with the regulations.

The statement does not contemplate an exemption from FATCA for any jurisdiction, but instead offers a model for information sharing (Model 1) based on existing bilateral tax treaties and allowing FFIs to report the necessary information to their respective governments rather than to the IRS.

It was then hoped that the model would serve as a precedent for the US's work with other countries, as Treasury officials continued to engage in discussions with those foreign governments about the effective and efficient implementation of FATCA by their FFIs.

In fact, the agreements with Switzerland and Japan offer a second model of cooperation by supplementing direct reporting under FATCA by Swiss and Japanese FFIs, together with the exchange of information between the respective governments on request.

“FATCA is an important part of the US government’s effort to improve tax compliance. The intergovernmental frameworks announced today provide a second model for implementing FATCA in a way that addresses domestic legal impediments and reduces burdens on financial institutions,” said Acting Assistant Secretary for Tax Policy Emily S. McMahon. “We welcome Switzerland’s and Japan’s willingness to strengthen and improve their cooperation with the US in combating international tax evasion.”

At the same time, the Treasury, in consultation with the jurisdictions participating in the joint statement issued in February, has been developing a model agreement that will serve as the basis for bilateral agreements with countries interested in adopting the intergovernmental framework contemplated in Model 1, and aims to publish this model shortly

'via Blog this'