China, US Initial Eleventh Hour FATCA Pact
Just days before the Foreign Account Tax Compliance Act’s entry into force, China and the United States initialed a model one intergovernmental agreement (IGA) on June 26, 2014, to simplify the process for financial institutions in both territories to provide relevant information to support tax enforcement activities under the Act.
Enacted by the US Congress in 2010, and effective from July 1, 2014, FATCA is intended to ensure that US authorities obtain information on accounts provided by foreign financial institutions (FFIs) to US persons. Failure by an FFI to disclose information about their US clients will result in a requirement to withhold 30 percent tax on payments of US-sourced income.
The initialed IGA provides for the reciprocal exchange of information through a central authority in both territories under the Act.
China and the US have yet to ratify the agreement.
Other nations to reach an agreement in substance with the United States in recent days include Ukraine, also on June 26, 2014, and Thailand, Saudi Arabia, and Guyana, each on June 24, 2014.
