Australia ready to join FATCA tax alliance

697

Australia is the latest country to join the US-led FATCA alliance to combat US citizens who fail to declare and pay tax on offshore accounts and investments.

The government is negotiating an intergovernmental agreement with the US to make reporting information under the Foreign Account Tax Compliance Act (FATCA) easier for Australian financial firms.

The US Treasury is phasing in FATCA compliance for US taxpayers from January 1, 2013.

FATCA demands foreign financial institutions (FFIs) send an annual list of their US taxpayer clients to the Internal Revenue Service (IRS) each year, which should give personal and financial details.

Two-way tax information flow

Many Australian financial firms are concerned that they are captured by FATCA reporting rules that could be complicated and expensive to apply as individual firms, so have requested the government to discuss a tax information swapping agreement with Washington.

Booking.com

Similar deals have already been agreed by the UK, Germany, France, Spain, Italy and Japan.

The reciprocal agreements allow the US to send financial details of non-nationals with accounts and assets held in US financial institutions back to the other countries.

The Australian wants to minimise costs and administration under FATCA for banks, investment firms and insurance companies.

FATCA is also impacting on firms belonging to the International Swaps and Derivatives Association (ISDA), who are concerned about implementing provisions for a 30% withholding tax.

FATCA swaps and derivatives update

ISDA wants the US to enforce FATCA by imposing the tax on the payee rather than the payer if the client refuses to comply with the law.

To accomplish this, the body has launched the 2012 ISDA FATCA Protocol.

The  Protocol allows market participants to amend the ISDA Master Agreement tax provisions to comply with FATCA.

What is FATCA?

FATCA was introduced by the US government in March 2010 to combat tax evasion by US citizens persons holding or controlling investments in offshore accounts.

FFIs with US clients who fail to comply with FACTA are obliged to implement a 30% withholding tax on income or gains for assets held in their accounts.

Also, FFIs who fail to comply with FACTA can face a ban on accessing money markets in the US.

The requirements are phased in from January 1, 2013 until January 2017.

Other countries in the Organisation of Economic Co-Operation & Development (OECD) are considering their own FACTA laws – led by the UK, where a select committee of MPs have also recommended the move.

Download the Free Pension Transfer Guide

Expat Pension Transfers Guide

iExpats.com expert writers have created a simple guide to Expat Pension Transfers just for you.

Find out how you could save tax, increase growth and investment opportunities with this simple, no-nonsense guide that will introduce QROPS, SIPPs and QNUPS options and talk through the pros and cons. Download the free guide by following the link below

1 COMMENT

  1. These governments, that buckle under to the IRS for fear of angering U.S. politicians, are being wimps. They will sell out their own citizens to keep on the good side of our politicians.
    In addition many Ausie’s are also American citizens, who will be impoverished by paying taxes in two countries and if they don’t owe taxes they will go broke getting tax advice and forms filled out.

Leave a Reply