By Alison Bennett, Bloomberg.com
Twelve governments have reached agreement with the U.S. Treasury on easing the reporting of foreign-held bank accounts by U.S. taxpayers, part of the Internal Revenue Service’s effort to combat offshore tax evasion.
The agreements will help implement the Foreign Account Tax Compliance Act, which as of July 1 will require that information about such accounts be supplied directly to the U.S. Similar accords have been reached in substance with 17 other jurisdictions, and talks on the deals are in advanced stages with many other countries, Bloomberg BNA reported.
The intergovernmental agreements — known as IGAs — are a critical part of compliance with the 2010 foreign account tax law, international tax lawyers said in interviews. Banks and other financial entities want to see as many IGAs as possible in effect as the July 1 deadline approaches.
“Financial institutions are looking at that and telling their jurisdictions we need to get this done,” said Manal Corwin, national leader of the international tax practice at KPMG LLP and a former Treasury official whose duties included focusing on the foreign accounts law, known as FATCA. “I think it has the impact of pushing this forward.”
FATCA requires U.S. financial institutions to impose a 30 percent withholding tax on payments made to foreign banks and other financial entities that don’t agree to identify and provide information on U.S. account holders. IGAs, in general, allow the foreign financial institutions to report the information to their own governments, which then would share the data with the IRS.
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