G5 FATCA AGREEMENT STRENGTHENS UK ABILITY TO TACKLE TAX EVASION
The Government has issued a joint statement with the governments of France, Germany, Italy, Spain and the United States, announcing the publication of the Model Intergovernmental Agreement to Improve Tax Compliance and to Implement FATCA. This is a key step towards delivering on the commitment to an intergovernmental approach to implementing the US Foreign Account Tax Compliance Act (FATCA) made by the same countries in their joint statement published on 8 February 2012.
As set out in the 8 February joint statement, the UK Government has aimed to address the legal barriers to complying with FATCA, ensure the burdens imposed on financial institutions are proportionate to the goal of combating tax evasion and establish a reciprocal approach to FATCA implementation.
More specifically, the Model sets out a framework within which:
The legal barriers to compliance, such as those related to data protection, have been addressed.
Withholding tax will not be imposed on income received by UK financial institutions.
UK financial institutions will not be required to withhold tax on payments they make.
The due diligence requirements are more closely aligned to the requirements under the existing anti-money laundering rules.
There is a wider scope of institutions and products effectively exempt from the FATCA requirements.
HM Revenue & Customs will receive additional information from the US Internal Revenue Service to enhance its compliance activities.
These achievements will benefit financial institutions, their clients and the UK.
The Government will now work to conclude negotiations with the US and sign the Intergovernmental Agreement as soon as possible. Financial institutions and other interested parties will then be consulted on the implementation of the agreement in the UK and draft legislation will be published later in 2012.
Welcoming the publication of the model, George Osborne, Chancellor of the Exchequer, said:
"We need to be as tough on tax evasion abroad as we are at home. The Model Agreement constitutes an important step in tackling international tax evasion. We have achieved substantial changes to how FATCA will be implemented that will provide significant benefits to UK financial institutions while strengthening our ability to tackle the evasion of UK tax. I look forward to the prompt conclusion of our bilateral negotiations and the signing of our agreement with the United States."
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