October 6, 2015
FATCA Update: IRS Announced the Exchange of Financial Information with other Countries
U.S. Begins Reciprocal Automatic Exchange of Tax Information under Intergovernmental Agreements
On October 2nd the IRS has announced the beginning of exchange of financial account information with other countries under the Foreign Account Tax Compliance Act (FATCA), meeting the September 30 deadline. FATCA requires foreign financial institutions to report U.S. owned accounts to the IRS to avoid 30% withholding on certain US source payments.
To implement FATCA the IRS has entered into Intergovernmental Agreements (IGAs) with foreign governments with the purpose to combat offshore tax evasion and improve international tax compliance. The IGAs enable the IRS to get information about accounts owned by U.S. residents at foreign financial institutions and some IGAs also require the IRS to reciprocally exchange with the foreign tax authorities certain information about accounts maintained by foreign residents at U.S. financial institutions.
According to the announcement IR-2015-111, “meeting this deadline reflects a significant international collaboration and partnership with dozens of jurisdictions around the world”.
The announcement does not disclose the countries with whom the information will be exchanged just that “the IRS will only engage in reciprocal exchange with foreign jurisdictions that, among other requirements, meet the IRS’s stringent safeguard, privacy, and technical standards”.
The IRS Commissioner John Koskinen stated that “the risks of hiding money offshore are growing and the potential rewards are shrinking”.
Read the full IRS Report here.
If you have any questions, please contact Mary Vasilescu at email@example.com or 973.994.9400.