Monday, November 12, 2012
Australia has commenced formal discussions with the US for an inter-governmental agreement that will minimize the impact of the Foreign Account Tax Compliance Act on Australian businesses.
FATCA was enacted by the US Congress in March, 2010. It is intended to ensure that the US tax authorities obtain information on financial accounts held by US taxpayers, or by foreign entities in which US taxpayers hold a substantial ownership interest, at Foreign Financial Institutions (FFIs) including banks, investment funds, insurance companies, foreign trusts and foreign corporations.
FFIs are required to enter into agreements with the US Internal Revenue Service (IRS) and Treasury, to provide such details. Failure by an FFI to disclose information would result in a requirement to withhold 30% tax on US-source income.
According to the Australian Treasurer Wayne Swan, a key objective of the negotiations is to facilitate Australian compliance with FATCA in a way that reduces its overall burden on Australian business. He also anticipates that an inter-governmental agreement would help improve existing reciprocal tax information sharing arrangements between the Australian Taxation Office (ATO) and IRS.
Swan says that the government will work with Australian stakeholders to ensure that their interests are reflected in the discussions.
New Zealand will also shortly begin talks with the US, with the aim of negotiating a FATCA tax information agreement. New Zealand's Revenue Minister Peter Dunne, said of the talks: "Without an inter-governmental agreement, financial institutions would have to enter into separate agreements with the IRS, withhold tax on certain accounts, and risk being in conflict with New Zealand's privacy and human rights laws".