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Ireland has signed a deal with the US to implement its Foreign Account Tax Compliance Act (FATCA), an agreement Irish Finance Minister Michael Noonan says will significantly increase the amount of tax information automatically exchanged between the two countries.
The Agreement to Improve International Tax Compliance and to Implement the FATCA was signed by Noonan and John Hennessey-Niland, Chargé d’affaires at the US Embassy in Ireland, late last week.
FATCA was enacted by the US Congress in March, 2010. It is intended to ensure that the US tax authorities obtain information on financial accounts held by US taxpayers, or by foreign entities in which US taxpayers hold a substantial ownership interest, at Foreign Financial Institutions (FFIs) including banks, investment funds, insurance companies, foreign trusts and foreign corporations. FFIs are required to enter into agreements with the US Internal Revenue Service (IRS) and Treasury, to provide such details. Failure by an FFI to disclose information would result in a requirement to withhold 30% tax on US-source income.
The agreement provides that Irish financial institutions will report to the Irish Revenue Commissioners in respect of US account-holders. In exchange, US financial institutions will be required to report to the IRS in respect of any Irish-resident account-holders. This information will then be automatically exchanged by the two tax authorities on an annual basis. The US and Ireland already have a double tax agreement (DTA) in place, but the Irish Finance Department stresses that the new deal will go a step further by providing for the annual automatic exchange of more detailed information.
The Finance Department says that the main purpose of the agreement is to combat international tax evasion. The aim is to do this by preventing individuals from hiding money outside of either jurisdiction in order to avoid paying tax. The Department believes that the early conclusion and publication of the agreement will provide certainty and clarity to Irish financial institutions and assist them in preparing to meet their compliance obligations under the FATCA.
Commenting on the signing, Noonan said: “Ireland is one of the first countries in the world to sign such an agreement with the United States and we welcome the opportunity to demonstrate Ireland’s commitment to helping combat international tax evasion. This agreement will have a positive impact on trade and investment between Ireland and the United States, and will provide certainty and clarity to Irish and American financial institutions who wish to do business with each other."
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