United States and French officials signed an intergovernmental agreement yesterday to advance the implementation of the Foreign Accounting Tax Compliance Act (FATCA). France becomes the 10th country to join FATCA, which goes into effect on July 1, 2014. In addition, the Treasury Department has reached 16 agreements in substance with various other nations, and has engaged in negotiations with more than 50 countries.
This was first reported in the New York Times, and can be found at:
The Foreign Account Tax Compliance Act was enacted in 2010 as part of the HIRE Act of 2010. FATCA requires financial institutions abroad, including hedge funds, to report on the holdings of U.S. taxpayers worth more than $50,000 to the Internal Revenue Service. In order to implement FATCA worldwide, the U.S. Treasury Department has been aggressively negotiating intergovernmental agreements throughout the world.
Since the law was enacted, FATCA has provoked controversy both in the United States and abroad. Many foreign governments and banks feel that the law is too broad and violates banking confidentiality laws, and is just a way for the United States to impose American tax and disclosure laws on the rest of the world. Furthermore, U.S. expatriates and dual citizens may now owe taxes to the IRS that they either never realized they had to pay before or simply refused to comply.
Now that the French intergovernmental agreement has been signed, French banks and financial institutions will report information about U.S. customers’ relevant offshore accounts to the French government, and then the French government will send that information on to the IRS.
Deputy Assistant Secretary for International Tax Affairs, Robert Stack, noted: “This agreement demonstrates the growing global momentum behind FATCA and strong support from the world’s most important economies.”
The 16-day U.S. federal government shutdown in October delayed the signing of the French intergovernmental agreement until yesterday. Furthermore, the IRS is required to send France similar information about French account holders, because the intergovernmental agreement is reciprocal.
The United States has previously signed nine other intergovernmental agreements with the United Kingdom, Denmark, Germany, Ireland, Mexico, Japan, Norway, Spain and Switzerland.
Mark D. Allison, a tax specialist with Caplin & Drysdale in New York, was quoted as saying: “There has been a reluctant resignation by financial institutions as the reality has sunk in that FATCA will move forward.”
Do you have an undisclosed foreign bank account in a country which has signed an agreement to enforce FATCA? Even if your account isn’t in one of those countries, chances are that nation could be the next country to sign an intergovernmental agreement with the United States.
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