Agreement benefits UK financial institutions, says Treasury
The UK and US governments have signed an agreement to implement the Foreign Account Tax Compliance Act (FATCA), a reporting regime designed to combat tax evasion by US tax residents using foreign accounts.
The agreement was the first of its kind and would benefit UK financial institutions, HM Treasury said, by ‘addressing their legal concerns with complying with FATCA and reducing the burdens imposed on them’. It would also boost HMRC’s ability to obtain information from the US.
‘The signing of the agreement follows the conclusion of negotiations on the UK-specific Annex II,’ HM Treasury said last week. ‘This sets out UK institutions and products which are seen as presenting a low risk of being used to evade US tax and are therefore effectively exempt from FATCA requirements. The UK-US agreement is closely based on the Model Agreement, and addresses legal barriers to financial institutions complying with FATCA; ensures that withholding tax will not be imposed on income received by UK financial institutions or on payments they make; ensures that the burdens imposed on financial institutions are proportionate to the goal of combating tax evasion; and establishes a reciprocal approach to FATCA implementation.’
The agreement has been laid before parliament and will undergo a 21 sitting day scrutiny period, the Treasury added. ‘Financial institutions and other interested parties will now be consulted on the implementation of the agreement in the UK and draft legislation will be published later in 2012.’
FATCA originally required overseas financial institutions to provide information directly to the IRS, potentially in breach of their home countries’ privacy laws, the Financial Times reported. ‘Those that did not comply faced, among other penalties, a 30% withholding tax on payments received from the US. After heavy lobbying from foreign governments and banks, the US struck a deal with governments of the UK, France, Germany, Italy and Spain in February that allowed banks in those countries to submit information on US account holders through their own governments rather than directly to US tax authorities.’
FATCA was initially ‘very much a unilateral proposal’, under which the US was the main gainer with other countries seeing little benefit, according to Dr Jeffrey Owens, former Director of the OECD’s Centre for Tax Policy and Administration. Writing in last week’s issue of Tax Journal, Owens said: ‘In recent weeks this has changed and what we are now seeing is a gradual multilateralism of FATCA with a strong emphasis on improving automatic exchange of information.’
Agreement benefits UK financial institutions, says Treasury
The UK and US governments have signed an agreement to implement the Foreign Account Tax Compliance Act (FATCA), a reporting regime designed to combat tax evasion by US tax residents using foreign accounts.
The agreement was the first of its kind and would benefit UK financial institutions, HM Treasury said, by ‘addressing their legal concerns with complying with FATCA and reducing the burdens imposed on them’. It would also boost HMRC’s ability to obtain information from the US.
‘The signing of the agreement follows the conclusion of negotiations on the UK-specific Annex II,’ HM Treasury said last week. ‘This sets out UK institutions and products which are seen as presenting a low risk of being used to evade US tax and are therefore effectively exempt from FATCA requirements. The UK-US agreement is closely based on the Model Agreement, and addresses legal barriers to financial institutions complying with FATCA; ensures that withholding tax will not be imposed on income received by UK financial institutions or on payments they make; ensures that the burdens imposed on financial institutions are proportionate to the goal of combating tax evasion; and establishes a reciprocal approach to FATCA implementation.’
The agreement has been laid before parliament and will undergo a 21 sitting day scrutiny period, the Treasury added. ‘Financial institutions and other interested parties will now be consulted on the implementation of the agreement in the UK and draft legislation will be published later in 2012.’
FATCA originally required overseas financial institutions to provide information directly to the IRS, potentially in breach of their home countries’ privacy laws, the Financial Times reported. ‘Those that did not comply faced, among other penalties, a 30% withholding tax on payments received from the US. After heavy lobbying from foreign governments and banks, the US struck a deal with governments of the UK, France, Germany, Italy and Spain in February that allowed banks in those countries to submit information on US account holders through their own governments rather than directly to US tax authorities.’
FATCA was initially ‘very much a unilateral proposal’, under which the US was the main gainer with other countries seeing little benefit, according to Dr Jeffrey Owens, former Director of the OECD’s Centre for Tax Policy and Administration. Writing in last week’s issue of Tax Journal, Owens said: ‘In recent weeks this has changed and what we are now seeing is a gradual multilateralism of FATCA with a strong emphasis on improving automatic exchange of information.’
