Governments agree new tax compliance model
by Gill Montia
Story link: Governments agree new tax compliance model
The governments of France, Germany, Italy, Spain, the UK and the US have published a joint communiqué outlining a new model of tax compliance, relating in particular to the implementation of the US Foreign Account Tax Compliance Act (FATCA).
According to HM Treasury, the model sets out a framework within which:
1. The legal barriers to compliance, such as those related to data protection, have been addressed.
2. Withholding tax will not be imposed on income received by UK financial institutions.
3. UK financial institutions will not be required to withhold tax on payments they make.
4. The due diligence requirements are more closely aligned to the requirements under the existing anti-money laundering rules.
5. There is a wider scope of institutions and products effectively exempt from the FATCA requirements.
5. HM Revenue & Customs will receive additional information from the US Internal Revenue Service to enhance its compliance activities.
The Government will now conclude negotiations with the US and sign up to an 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 progress so far, George Osborne, Chancellor of the Exchequer, said: “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.”