Croatia and US sign agreement to prevent tax fraud and evasion
Croatia and the United States have signed an agreement on the application of the Foreign Account Tax Compliance Act (FATCA) concerning accounts in foreign financial institutions, in order to improve transparency between the two countries in the area of taxes, the Croatian Finance Ministry announced in a statement on Friday.
The agreement was signed by Finance Minister Boris Lalovac and US Ambassador Kenneth Merten. Such agreements are proof of increasing international cooperation in combating tax evasion round the world, the statement said.
“The signing of this agreement is an important step in cooperation between the US and Croatia in preventing tax fraud and tax evasion. Failure by taxpayers to meet their tax obligations leads to an uneven distribution of the tax burden to the detriment of those that duly pay their taxes. FATCA is an important part of cooperation between the governments of the US and Croatia in dealing with this issue,” the statement said.
Croatia is actively working on preventing tax evasion through international cooperation and information exchanges within the European Union and with third countries. Similar to the US FATCA, Croatia will adopt the OECD standard for the automatic exchange of information on financial accounts, which will also enable an automatic exchange of information with EU member states and with third countries, the statement said.
FATCA is fast becoming a global standard for the prevention of tax evasion in offshore accounts. It has been applied in the US since 2010 to prevent offshore tax evasion by improving transparency and access to information on accounts held by US taxpayers abroad.
FATCA requires foreign financial institutions to report to the US Internal Revenue Service (IRS) once a year, directly or indirectly through competent authorities, information concerning assets held by US citizens in accounts abroad.
Under the FATCA agreement between the US and Croatia, financial institutions in Croatia are required to submit to the Croatian Tax Authority information on accounts held by US nationals in Croatia, which in turn will send such information to the IRS. Conversely, the IRS will inform the Croatian Tax Authority about Croatian owners of accounts in the United States.