Full Reciprocity Under FATCA Is a Work in Progress, IRS Official Says
By Andrew M. Ballard
ORLANDO, Fla.–Although the United States has committed to achieving reciprocity regarding the exchange of financial transaction information under the Foreign Account Tax Compliance Act, domestic banks are not subject to the same reporting requirements as are their foreign counterparts, an Internal Revenue Service official said Jan. 25.
According to Ted Setzer, manager of IRS’s Large Business & International Division, although existing requirements on U.S. banks will provide other governments with similar information required of foreign banks under FATCA, “clearly existing U.S. rules don’t require U.S. financial institutions to provide the exact same information that a foreign institution has to under FATCA.”
“How we get to full reciprocity and how long it takes is something we’ll have to be working on.”Ted Setzer, LB&I Division
Setzer made his comments during a session at the 2013 midyear meeting of the American Bar Association Section of Taxation on recently released implementing FATCA.
Penalties For Non-Compliance
The 2010 law is intended to stop cross-border tax evasion, requiring foreign financial institutions to register and tell IRS about their U.S.-owned accounts. If the banks do not comply, they could face a 30 percent withholding tax on such accounts.
Full implementation of FATCA was advanced through long-awaited final regulations (T.D. 9610) issued Jan. 17 by IRS and the Treasury Department.
The rules are aimed at providing a step-by-step process for U.S. account identification, information reporting, and withholding requirements for foreign financial institutions (FFIs), other foreign entities, and U.S. withholding agents. The rules also are intended to build on intergovernmental agreements (IGAs) that allow financial institutions to report information on U.S.-owned accounts directly to their own governments, which then would share the data with the United States.
Setzer was among participants in a session on the new rules and related implementation timelines.
Responding to a question about reciprocity, Setzer said the United States had committed to such a concept. However, U.S. reporting rules for domestic banks “are what they are,” and do not require identification procedures identical to those required under FATCA, he said.
“How we get to full reciprocity and how long it takes is something we’ll have to be working on,” Setzer said.
By Andrew M. Ballard