Retirement Plans Get Relief from Foreign Asset Reporting Law
|Date Posted: July 27, 2012|
Retirement plan administrators that do business with foreign financial institutions may breathe a sigh of relief now that regulators have further clarified a reporting exemption that applies to them under the Foreign Account Tax Compliance Act.
The proposed regulations under FATCA already provide for an exemption for certain types of retirement plans, a senior U.S. Treasury Department official acknowledged July 26 in a briefing to media. But the release of a model intergovernmental agreement reveals a second level of comfort in that parties to the agreement may list specific types of plans to be exempt from reporting requirements. Officials consider retirement plans, along with other types of entities, to present a low risk for the kind of evasion the law is intended to stop.
FATCA, enacted March 18, 2010, aims to curb tax evasion through the use of offshore bank accounts, by requiring foreign financial institutions -- including investment advisers, hedge funds, private equity funds, banks and other types of foreign financial institutions, or FFIs -- to report their American accountholders’ assets above a certain threshold, to IRS. The U.S. Treasury unveiled a model reciprocal intergovernmental agreement July 26, to which the United States and five other countries agreed. The agreement allows signatories -- which will include financial institutions in France, Germany, Italy, Spain, the United Kingdom and the United States -- to list specific exempt types of retirement plans in an appendix.
While FFIs in the reciprocal countries will be exchanging financial data with each other, there will be other countries that can sign a nonreciprocal agreement, which will allow for the flow of information from those countries to IRS, but not the reverse.
Finding out More
The United States, France, Germany, Italy, the United Kingdom and Spain released a joint communiqué providing further details.