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U.S. Signs Six New Bilateral Agreements to Crack Down on Tax Evasion
Author: Scarinci Hollenbeck, LLC
Date: January 6, 2014
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The U.S. Department of Treasury made positive steps forward in December in its campaign against tax evasion, with the agency signingbilateral agreements with jurisdictions to comply with the tax law provisions outlined by the Foreign Account Tax Compliance Act.
In a one-week time span in mid-December, Malta, the Netherlands, The Islands of Bermuda, and three UK Crown Dependencies – Jersey, Guernsey, and the Isle of Man – signed various agreements with the Treasury Department to implement FATCA. Treasury officials said the agreements represented another step forward in ensuring compliance with tax laws, strengthening global relationships and collaborating to reach a common end goal.
Malta, the Netherlands, and each of the Crown Dependencies entered into Model 1A agreements. The structure of these agreements requires that foreign financial institutions in these jurisdictions report the information required under FATCA about U.S. accounts to their home governments, which in turn will report the information to the Internal Revenue Service. Additionally, these agreements are reciprocal, meaning that U.S. officials will also be required to provide similar tax information to these governments regarding individuals and entities from their jurisdictions with accounts in the U.S.
“FATCA continues to gather momentum as we work with partners worldwide to combat offshore tax evasion,” said Deputy Assistant Secretary for International Tax Affairs Robert Stack. “This large number of signings in one week alone sends a strong signal to tax evaders everywhere: international support for FATCA is growing.”
To date, the U.S. has signed 18 FATCA intergovernmental agreements (IGAs) and 11 agreements in substance. The government is still engaging in discussions with a number of other countries and jurisdictions ahead of the 2014 implementation date. Those countries that choose not to sign agreements and adhere with FATCA mandates may face a 30 percent withholding penalty, and essentially be frozen out of U.S. markets.
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