Fatca Follow Up

[55Jay]

Ran across this topic elsewhere and recalled Jim Gant's thread. The IRS ref is pasted below.

It appears that FATCA is on hold for now! The IRS Announcement 2012-42, dated 24 Oct 12, defers the implementation timelines for withholding agents and foreign financial institutions to complete due diligence requirements of the HIRE Act. The financial institutions will have until 1 Jan 2017 to start withholding taxes from US taxpayers’ source income and until 1 Jan 2014 to put in place the reporting requirements mandated under the HIRE Act provisions.

This is a direct response to the many issues raised by tax professionals and foreign bankers who have challenged the various provisions of the law.

http://www.irs.gov/p...rop/A-12-42.pdf

[TallGuyJohninBKK]

Here's a subsequent update on the interesting direction this issue is turning, with perhaps the U.S. now moving toward reciprocal action by pushing to begin requiring U.S. banks to disclose to foreign countries the info about their citizens holdings in U.S. banks.... as the price for getting the foreign countries to do the same with the U.S.

From Reuters:

WASHINGTON (Reuters) - The Obama administration may soon ask Congress for the power to require more disclosure by U.S. banks of information about foreign clients' accounts to those clients' home governments, as part of a crackdown on tax evasion, sources said on Monday.

In a move facing resistance from some in the U.S. banking industry, two tax industry sources said the administration was considering asking Congress in an upcoming White House budget proposal for the authority to require more disclosure from U.S. banks.

PUSHBACK ON FATCA

FATCA requires non-U.S. banks, investment funds and other financial institutions to tell the IRS about accounts held by Americans with more than $50,000. Foreign firms that ignore the law could be frozen out of U.S. financial markets.

When FATCA was first approved, many foreign banks complained that they could not comply without violating their home countries' financial privacy laws. So Treasury started negotiating bilateral FATCA agreements with foreign governments so they could be go-betweens for their banks and the IRS.

Only four bilateral pacts are fully completed, with the United Kingdom, Denmark, Ireland and Mexico. U.S. Treasury officials are still negotiating with more than 50 other countries.

Deals are pending with major trading partners such as France, Germany, Italy, Japan, Switzerland, Canada and the Netherlands.

China has been publicly dismissive of FATCA, but it is talking with U.S. officials behind the scenes, sources said.

"The People's Republic of China may be particularly interested in a reciprocal exchange of FATCA information," said Karl Egbert, a lawyer with law firm Dechert LLP in Hong Kong.

France and Germany "have been asking for something more like full reciprocity," said Jonathan Jackel, a lawyer with the law firm of Burt Staples & Maner LLP in Washington, D.C.

The United States already shares some taxpayer information with foreign countries with which it has a tax treaty or a formal information-sharing agreement.

http://finance.yahoo.com/news/exclusive-foreigners-accounts-u-banks-233826856.html

[55Jay]

Interesting. First thing I thought was they are asking for reciprocity to set up a platform for continued rejection of FACTA if (maybe hoping?) that the US would show its hypocrasy by saying "no". Seems the US is on side though, everybody band together to track money and people all over the world.

Pretty scary stuff, tip of the iceberg on things to come.

[TallGuyJohninBKK]

Presumably, other countries have the same financial interest as the U.S., and that is to not have their citizens escape domestic taxation by having their funds hidden away somewhere outside their own country.

[JimGant]

Only four bilateral pacts are fully completed, with the United Kingdom, Denmark, Ireland and Mexico. U.S. Treasury officials are still negotiating with more than 50 other countries.

From the following slightly-dated article, two countries in our neighborhood (Malaysia and Singapore) have ongoing bilateral discussions.

http://www.kpmg.com/...gotiations.aspx

But, even in the "future agreements being explored" section, no sign of Thailand. Not sure what that might mean -- but a bilateral government to government pact certainly takes much of the FATCA burden off the financial institutions by using the reporting structure currently in-place to the tax authority. And letting them shovel the info to Uncle Sam.

Most of these bilateral agreements hinge on the tax treaties already in effect, which in the boilerplate state that tax information will be exchanged between the two countries. Thailand had a problem with this in negotiating its tax treaty with the US (possibly with delusions of wanting to be the Switzerland of the Orient). They finally agreed to share info, but only in situations that were clearly criminal.

Thus, hinging any FATCA bilateral on the existing tax treaty would seemingly be problematic........

Again, don't know what, if any, impact this may have. But if the Thai financial institutions don't have the Thai government as the middleman (via a bilateral), it might get interesting for some of them. (But, as has been mentioned in another thread, Bangkok Bank, with its New York presence, wouldn't blink about going it alone.) Having an existing account by 12/31/13 would also be a plus, as they'll receive less FATCA scrutiny (read: hassle for the banks) than new account openings.

[TallGuyJohninBKK]

Thanks for the interesting KPMG article from Nov., Jim. It's pretty much in line with the Reuters article I posted above.

Particularly interesting that the KPMG article, alluding to the Treasury Department announcement, includes the three different lists of other countries based on how close the U.S.was to reaching some reciprocal FATCA agreement with them -- real close, actively talking, hopeful. And Thailand didn't seem to be on any of those three lists. Singapore and Malaysia were on the middle list, and China was missing too.

Perhaps some further evidence of how disfunctional the current Thai government is, particularly regarding anything other than internal domestic political issues.

But what's more interesting to me is, what happens with the countries (and their banks) that don't reach any reciprocal FATCA agreements with the U.S. Do the draconian enforcement measures in the original law still proceed on track, or does something else pop up along the way???

[JimGant]

Hey, TallGuy,

A little more reading on my part saw that the Bangkok Post had a related article on FATCA on 8 Jan. I know there's something about the Bangkok Post that is verboten here, but here's a quote from them anyway:

Despite the broad impact and cost of the US's new Foreign Account Tax Compliance Act (Fatca), Thailand's financial institutions are preparing to comply, says Twatchai Yongkittikul, secretary-general of the Thai Bankers Association.

The association discussed the issue with the Bank of Thailand and the Revenue Department. Initially, these authorities will report the financial information of American clients to the US Treasury as part of a government agreement, rather than have each institution report separately, he said.

So, sounds like Thailand too plans to do a bilateral FATCA with the US.