U.S., Britain Sign First Bilateral FATCA Agreement
|Date Posted: September 17, 2012|
U.S. retirement plan administrators that do business with British financial institutions should note that certain information about their bank and other accounts in the United Kingdom must be reported to the U.S. government unless the retirement plan is determined to be exempt from the reporting requirements. On Sept. 14, the U.S. Treasury Department announced it signed an agreement with the United Kingdom to implement the information reporting and tax withholding provisions of the Foreign Account Tax Act, or FATCA, as the U.S. law is known, which aims to curb tax evasion through the use of offshore accounts.
This was the first such agreement after the government in July 2012, under a U.S. anti-money laundering law, unveiled a model intergovernmental agreement that a short list of nations would be able to execute between each other. This means U.S. financial institutions would have to report their British accountholders’ data to British regulators.
The proposed regulations under FATCA already provide for an exemption for certain types of retirement plans, a senior Treasury official acknowledged July 26, but the model intergovernmental agreement provides a place for the signatories to list specific types of plans that are to be exempt from the reporting and withholding requirements.
FATCA, enacted in 2010, requires that foreign financial institutions, or FFIs, report their American accountholders’ assets above a certain threshold to IRS. FFIs can include investment advisers, hedge funds, private equity funds, banks and other types of financial institutions. The countries that can sign on to the model reciprocal agreement are limited to the United States, France, Germany, Italy, Spain and the United Kingdom.
Other countries may sign similar, nonreciprocal agreements with the United States, providing for one-way information flowing from those countries’ FFIs to IRS.
“Today’s announcement marks a significant step forward in our effort to work collaboratively to combat offshore tax evasion,” Treasury Assistant Secretary for Tax Policy Mark Mazur said through a press release. “We are pleased that the United Kingdom, one of our closest allies, is the first jurisdiction to sign a bilateral agreement with us and we look forward to quickly concluding agreements based on this model with other jurisdictions.”