The Treasury Department said it is engaging with more than 50 countries and jurisdictions across the globe to improve international tax compliance and implement the information reporting and withholding tax provisions in the Foreign Account Tax Compliance Act.
FATCA, which was included as part of the HIRE Act of 2010, requires foreign financial institutions to report on the accounts of U.S. taxpayers to the IRS. As part of the effort to enforce FATCA, the U.S. has been signing information-sharing agreements with other countries allowing U.S. financial institutions to share account information with other countries about their own citizens as well.
So far, the U.S. has announced it negotiated model agreements with five other countries: the United Kingdom, France, Germany, Italy and Spain, and signed a deal with the United Kingdom. The announcement Thursday from the Treasury Department that it is “engaging” with more than 50 jurisdictions would potentially open such exchanges more than tenfold, even without formal agreements in place.
FATCA has provoked controversy, particularly among foreign banks and hedge funds, as well as U.S. expatriates and dual citizens, and the Treasury Department and the IRS have been delaying some of its provisions (see FATCA Delay Offers Some Breathing Room).
Enacted by Congress in 2010, the FATCA provisions target noncompliance by U.S. taxpayers using foreign accounts. The Treasury Department’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.
“Global cooperation is critical to implementing FATCA in a way that is targeted and efficient,” said Treasury Assistant Secretary for Tax Policy Mark Mazur in a statement. “By working cooperatively with foreign governments and financial institutions, we are intensifying our ability to combat tax evasion while minimizing burdens on financial institutions.”
This summer, Treasury published a model intergovernmental agreement for implementing FATCA and announced the development of a second model agreement. These models serve as the basis for concluding bilateral agreements with interested jurisdictions.
The Treasury Department has already concluded a bilateral agreement with the United Kingdom (see U.S Treasury Signs Bilateral Agreement with U.K.). Additional jurisdictions with which the Treasury is in the process of finalizing an intergovernmental agreement and with which Treasury hopes to conclude negotiations by the end of the year include France, Germany, Italy, Spain, Japan, Switzerland, Canada, Denmark, Finland, Guernsey, Ireland, Isle of Man, Jersey, Mexico, the Netherlands and Norway.
Jurisdictions with which the Treasury said it is actively engaged in a dialogue towards concluding an intergovernmental agreement include Argentina, Australia, Belgium, the Cayman Islands, Cyprus, Estonia, Hungary, Israel, Korea, Liechtenstein, Malaysia, Malta, New Zealand, the Slovak Republic, Singapore, and Sweden. The Treasury said it expects to be able to conclude negotiations with several of these jurisdictions by year’s end.
The jurisdictions with which Treasury is working to explore options for intergovernmental engagement include Bermuda, Brazil, the British Virgin Islands, Chile, the Czech Republic, Gibraltar, India, Lebanon, Luxembourg, Romania, Russia, Seychelles, Sint Maarten (Netherlands side of St. Martin), Slovenia and South Africa.
The Treasury Department said it plans to continue its outreach to interested jurisdictions that wish to consider an intergovernmental approach to implementing FATCA, including participation in a meeting hosted by the Qatar Central Bank in early December to provide information about FATCA and the intergovernmental agreements to invited senior government officials and financial institutions in the Gulf Cooperation Council.
The Treasury Department and the IRS plan to finalize the regulations implementing FATCA in the near term. Updates and further information on FATCA can be found on the Treasury FATCA page at http://www.treasury.gov/resource-center/tax-policy/treaties/Pages/FATCA.aspx.