FATCA deal needs DFA okay
THE BUREAU of Internal Revenue (BIR) is waiting for the authority to enter into a bilateral agreement with Washington for the local implementation of a US tax law.
“We’re just waiting for the approval of a special power to go into a bilateral deal with the US,” Ms. Jacinto-Henares said last week.
“We’ve already made the recommendation to the DFA (Department of Foreign Affairs). The DFA is about to recommend to Malacañang to issue a special power to us.”
Sought for confirmation, Foreign Affairs Spokesman Charles C. Jose said via text that he would check on the progress of the BIR’s request.
Under Executive Order 459 issued in 1997 by President Fidel V. Ramos, the negotiation of treaties and executive agreements should be coordinated and made only with the participation of the DFA.
Any deals made with foreign countries must have the proper authorization, which should first be secured from the President by the lead government department or agency through the Foreign Affairs secretary.
The FATCA is aimed at compelling Americans hiding money in offshore accounts to pay the right taxes.
Under law, banks outside the US with accounts of American nationals should register with the Internal Revenue Service (IRS) as foreign financial institutions (FFIs).
As FFIs, these banks are required to audit their accounts and report those that hold US income. Those that fail to sign up with the IRS by June this year will be slapped a 30% withholding tax on all US-sourced income.
The Philippines, through the BIR, and US authorities have been in talks since last year for the signing of an intergovernmental agreement (IGA) that would govern the domestic implementation of the FATCA.
Ms. Jacinto-Henares said the Philippines would adopt the “Model 1” IGA.
“Since we have a double taxation treaty with the US, we chose Model 1. Under this model, banks will report to the BIR and we will give the necessary information to the United States’ IRS for them,” she explained.
The Bankers Association of the Philippines has said that American expats and citizens with local bank deposits will have to sign waivers given limitations under Republic Act 1405 or the Bank Secrecy Law, or else banks may be forced to close their accounts.
The Philippine Bank Secrecy Law limits access to information about domestic accounts.
The Bangko Sentral ng Pilipinas (BSP) likewise said last month that it would study the possibility of imposing sanctions on banks that open themselves to financial or legal risks by not complying with the FATCA.
Such sanctions could include capital charges on banks’ US citizen-linked assets for “reputational and operational risks,” the BSP said.
