8 More Bilateral Agreements Signed After UK and Treasury Department has Widened Its Pursuit by 30%
The six month FATCA delay in the implementation of bilateral information sharing and withholding agreements to which the United States agreed seems to be benefitting the Department of Treasury as much as it is foreign countries that need time to make adequate preparations. This is because the Treasury Department has widened its pursuit of foreign nations to join in the global information sharing network from 60 to 80 – without really even trying.
While the United States is interested in beginning a systematic information sharing network as quickly as possible, it has happily conceded to the fact that the overwhelming level of interest being sparked in foreign nations around the globe makes a quick implementation of agreements quite challenging. Just as foreign countries need time to devise an infrastructure that meets FATCA demands, the United States needs time to negotiate with all other foreign countries interested in signing agreements and modify its reporting and withholding guidelines for citizens of foreign countries.
What Are the FATCA Demands Upon Foreign Territories?
New FATCA Agreements place mandates upon foreign financial institutions to report financial account information on accounts held by US Citizens and Green Card Holders to the United States or face withholding from compliant institutions. In order for a foreign bank to avoid US withholding, it must be willing to:
Systematically identify accounts held by US Persons and report all required information on each account identified to the United States
Maintain a database of noncompliant banks (those who refuse to divulge US Account Holders) and withhold 30% of payments issued to such non-participating institutions on behalf of or into accounts held by US Taxpayers.
In addition to withholding by participating financial institutions of payments to those that have chosen not to participate, noncompliant institutions will be subject to withholding on other payments such as proceeds from US Securities, US-sourced interest and dividend payouts, and other payments made from the United States.
While many foreign financial institutions are currently being given the choice of complying with FATCA mandates or facing withholding, even those who are pledging cooperation are facing concerns about their own country’s privacy laws in which requested communication with the IRS is a prosecutable offense. If is for this reason that the United States has been involved in creating IGAs (Intergovernmental Agreements) rather than agreements with specific financial institutions. Through IGAs, financial institutions are allowed to report information to their government and foreign government officials will be responsible for sharing requested details with the United States.