BSP mulls sanctions vs local banks that fail to comply with US tax evasion law
MANILA – The Bangko Sentral ng Pilipinas (BSP) is mulling over sanctions on local banks that fail to comply with a US tax evasion law.
“The BSP will study what sanctions, if any, we will impose if a local bank decides it wishes to handle US persons but exposes itself to financial and legal risks by not complying with FATCA,” BSP Governor Amando M. Tetangco Jr. said, referring to the Foreign Account Tax Compliance Act.
In a memorandum issued in July last year, the BSP advised banks to evaluate if they are covered by FATCA, the potential implications on their respective businesses, and prepare their operating businesses as appropriate.
“In essence, FATCA compliance is basically a bank’s business decision. If it decides to handle US persons, then they must manage all risks associated with that including all compliance issues. If it doesn’t want to be covered by the FATCA rules, then they simply should refrain from handling US persons,” Tetangco said.
With the backing of the Department of Finance (DOF), the Bureau of Internal Revenue (BIR) has recommended adoption of the Model 1 Inter-governmental Agreement (IGA).
Under the Model 1 IGA, foreign financial institutions will provide information to the FATCA partner, in the case of the Philippines the BIR, which will in turn provide information to the US Internal Revenue Service (IRS), Tetangco said.