U.S. has extended the time for completion of international tax agreements.
Working with more than 80 countries around the world, the United States has extended the time for completion of international tax agreements aimed at fighting offshore tax evasion and boosting global tax compliance.
The U.S. Department of the Treasury and the Internal Revenue Service announced the action in a July 12 news release. It extends the start of the U.S. Foreign Account Tax Compliance Act (FATCA) withholding and account due diligence requirements for six months to allow more time for agreements with foreign jurisdictions to be completed.
The extension, which runs to July 1, 2014, will also provide foreign financial institutions with the time necessary to comply with FATCA while helping to ensure that the law is implemented efficiently.
“Given the groundswell of international interest in FATCA, we are providing an additional six months to complete agreements with countries and jurisdictions across the globe, before withholding begins,” said Treasury Deputy Assistant Secretary for International Tax Affairs Robert B. Stack.
FATCA, enacted by the U.S. Congress in 2010, targets noncompliance by U.S. taxpayers using foreign accounts and establishes a global approach to combating offshore tax evasion. It requires U.S. financial institutions to withhold a portion of payments made to foreign financial institutions that do not agree to identify and report information on U.S. account holders.
To make compliance with the reporting requirements of FATCA feasible, particularly for foreign financial institutions in jurisdictions where existing laws prohibit this type of reporting, the Treasury Department has developed intergovernmental agreements that rely on governmental cooperation to facilitate the exchange of FATCA information. This approach not only addresses legal impediments that exist in some foreign countries, but also reduces burdens on financial institutions and streamlines the reporting process.
This approach to compliance has been praised by the Organisation for Economic Co-operation and Development (OECD), the G8 and many others within the global community.
Stopping offshore tax evasion is a global issue, and the intergovernmental agreements are a crucial component to FATCA implementation. To date, the Treasury Department has signed nine intergovernmental agreements and is engaged in related conversations with more than 80 other jurisdictions.
“The high volume of international participation in this effort represents a quintessential race to the top,” said Deputy Assistant Secretary Stack. “Every additional country we bring on board means we are one step closer to winning the fight against offshore tax evasion.”