The U.S. Treasury recently announced that the U.S. signed six bilateral agreements to implement tax evasion provisions enacted by Congress to target non-compliance by U.S. taxpayers using foreign accounts.
The six agreements with Bermuda, Malta, the Netherlands and U.K. territories Jersey, Guernsey and the Isle of Man implement information reporting and withholding tax provisions under the Foreign Account Tax Compliance Act.
FATCA requires financial institutions to disclose information on all U.S. clients who hold non-U.S. accounts or funds, or be subject to a 30 percent withholding tax on all U.S. income.
“FATCA continues to gather momentum as we work with partners worldwide to combat offshore tax evasion,” Deputy Assistant Secretary for International Tax Affairs Robert B. Stack said. “This large number of signings in one week alone sends a strong signal to tax evaders everywhere: international support for FATCA is growing.”
Governments can either enter institutions into direct agreements with the IRS to comply with the U.S. Treasury’s FATCA regulations or to implement the provisions by entering into one of two different model intergovernmental agreements with the U.S.
Malta, the Netherlands and the three U.K. territories entered a Model 1A agreement, under which the institution reports information directly to the home government, which in turn reports the information to the IRS. Bermuda signed a Model 2 agreement, under which financial firms can register directly with the IRS and report FATCA information.