Taiwan is an ‘Agreements in Substance’ nation of FATCA
The Financial Supervisory Commission (FSC, 金融監督管理委員會) yesterday stated that Taiwan is currently recognized by the United States of America as an “Agreements in Substance” nation of the Foreign Account Tax Compliance Act (FATCA).
The status allows Taiwanese financial institutions and their patrons to be exempted from a 30 percent withholding tax on incomes from the United States, as regulated by FATCA. FATCA is a federal law targeted toward American citizens so as to regulate taxation among U.S. taxpayers, making it difficult to conceal assets in offshore shell corporations and accounts. Nations who do not agree to FATCA are subjected to have the 30 percent withholding tax enforced upon their citizens with U.S. incomes and their financial establishment in the U.S. Internationally, FATCA is implemented as an Intergovernmental Agreement (IGA) that is available in two approaches to partnering nations.
Model one asks for financial institutions in partnering countries to agree to report their U.S. accounts to local tax authorities, who will then provide the information to the U.S. Model two requires financial establishments in partner countries to agree to report directly to the American Internal Revenue Service (IRS) while agreeing to lower legal barriers to the reports.
79 Nations Agree to FATCA
According to the U.S. Department of the Treasury, 36 countries including Germany, England and Japan have agreed to FATCA and have since been recognized as IGA partnership nations. Forty-three other countries including Taiwan, South Korea and Singapore have been regarded as “Agreements in Substance” nations that share the same fundamental regulations with IGA countries.
The FSC has stated that Taiwan has opted to select the same model as Japan, model one, as part of FATCA’s international approach. As regulated by FATCA, local financial institutions are required to attain a Global Intermediary Identification Number from a website designated by the IRS to be officially registered in the system. Currently, 136 Taiwanese financial institutions including 38 banks have completed their registration.