Taiwan should prepare for FATCA implementation: accountant
The US Foreign Account Tax Compliance Act (FATCA) will be implemented on July 1 this year, and it would be better for Taiwan’s financial institutions not to speculate any more, a prominent accountant has said in an interview our sister paper Commercial Times.
Chou Sih-ci said several financial operators still believe Taiwanese funds do not count as legal persons and therefore do not need to be registered. But this is an incorrect view which must be corrected as soon as possible, otherwise the US authorities will see these funds as irregular and subject to a 30% fine, Chou said.
The US Department of the Treasury and Internal Revenue Service (IRS) made it clear on Feb. 20 that foreign account taxes have to follow the FATCA regulations as outlined in a 565-page document.
The FATCA is a US act that requires people who hold American citizenship, including those who live outside the US, to report their financial assets held outside of the country and controversially requires foreign financial institutions to report to the IRS about their American clients.
FATCA was established to combat offshore tax evasion and has three main provisions. The first requires foreign financial institutions such as banks to enter into an agreement with the IRS in order to identify their American account holders and to disclose the account holders’ names, addresses and the accounts’ balances, receipts and withdrawals.
Second, it requires that American citizens owning these foreign accounts or other specified financial assets must report them on a new Form 8938 filed with the individual’s US tax returns if the accounts are generally worth more than US$50,000. Third, it closes a tax loophole that foreign investors have used to avoid paying taxes on US dividends by converting them into “dividend equivalents” through the use of swap contracts.
Credit: Want China Times