US looks for European partners on FATCA
The US Treasury has changed its approach to the Foreign Account Tax Compliance Act (FATCA), a regulation designed to fight offshore tax evasion by Americans.
The US Treasury is proposing that France, Germany, Italy, Spain and the UK be allowed to collect information on financial accounts covered under FATCA and forward that information to the US. The new proposals, which are due to take effect next year, aim to lift the burden FATCA imposes on financial institutions by involving the governments of five European countries.
Under its original proposals, financial institutions were tasked with collecting and reporting the data. The proposals attracted considerable criticism worldwide for legal issues and the heavy burden of costs they would impose on financial institutions.
Allowing governments to report the information takes advantage of long-standing procedures and relationships between financial institutions and their home countries, lowering the compliance burden, the US Treasury said.
A joint statement was released by the governments of the United States, France, Germany, Italy, Spain and the United Kingdom, stating that they are exploring a common approach to FATCA implementation through domestic reporting and reciprocal automatic information exchange.
This statement also indicates that negotiations are in place so that UK firms designated as Foreign Financial Institutions (FFI) may not need to enter into an FFI agreement with the IRS.
Julie Patterson, director of Authorised Funds and Tax at the UK’s Investment Management Association, welcomed the joint statement. She said: “The approach envisages firms reporting to their domestic authorities and governments sharing that information. In practice, this would mean that UK firms and funds would not have to sign up to an agreement with the IRS, reducing many of the industry’s legal concerns with the original proposals.