U.S. gives foreign banks more time on anti-tax dodge law
WASHINGTON (Reuters) – The U.S. Treasury Department on Wednesday gave foreign financial institutions 10 extra days to register with the U.S. government, under a new law to combat offshore tax dodging by Americans that goes into effect on July 1.
Under the Foreign Account Tax Compliance Act (FATCA), foreign banks, insurers and investment funds must send the Internal Revenue Service information about Americans’ and U.S. permanent residents’ offshore accounts worth more than $50,000.
Institutions that fail to comply could effectively be frozen out of U.S. markets.
In addition to extending registration to May 5 from April 25, the Treasury Department said more countries are now FATCA compliant, alleviating worries for financial firms in Brazil, South Korea and South Africa, among other countries.
Countries that have FATCA agreements “in substance” with the United States will be seen as complying with the law, even if the agreements are not finalized by December 31, 2014, Treasury said.
This decision increased to 45 from 26 the number of countries that have “intergovernmental agreements” (IGAs) with the United States, which allow a country’s financial institutions to comply with FATCA via their domestic regulators.
Before the announcement, many foreign businesses were unsure how to comply with FATCA by July 1 if their home countries had not yet signed IGA deals with the United States.
Notably left off the list were China, Hong Kong, Russia and Singapore, said Jonathan Jackel, a lawyer with Burt, Staples & Maner LLP.
“They are very important financial centers,” Jackel said. “When those agreements come online that will be very significant.”
The list of countries with such IGAs is expected to grow in the coming weeks as additional agreements in substance are reached, the Treasury Department said.
Credit: Chicago Tribune