U.S. Treasury says reaches foreign tax law pact with China

(Reuters) – The United States has reached an agreement with China on implementing and enforcing a new U.S. law meant to combat overseas tax avoidance by Americans, a U.S. Treasury Department official said on Thursday.

Long seen as a crucial step for the rollout of 2010’s Foreign Account Tax Compliance Act, or FATCA, the agreement in substance with China was concluded just days before the law is set to take effect on July 1.

The United States now has FATCA agreements being treated as in effect with more than 80 jurisdictions, the official said.

FATCA will require foreign banks, investment funds and other institutions to tell the U.S. government about Americans’ accounts that are worth more than $50,000.

Foreign firms that do not comply face a 30 percent withholding tax on their U.S. investment income and could effectively be frozen out of U.S. capital markets.

The law was written after a scandal involving Americans dodging U.S. taxes through secret bank accounts in Switzerland.