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Germany, US Sign IGA On Tax Evasion

by Ulrika Lomas,, Brussels

04 June 2013

Germany and the US have recently signed an intergovernmental agreement (IGA) aimed at improving tax information sharing. Both states undertake to share information as a matter of course. According to the German Government, the accord marks an important step toward the implementation of a global model for the automatic sharing of tax-relevant information.

The IGA states: "the Parties are committed to working together over the longer term towards achieving common reporting and due diligence standards for financial institutions."

It adds: "The United States of America acknowledges the need to coordinate the reporting obligations under FATCA with other US tax reporting obligations of German financial institutions to avoid duplicative reporting."

The agreement is linked to the US "Foreign Account Tax Compliance Act" (FATCA). Under the provisions of this Act, foreign financial institutions will be required as of 2015 to notify the US tax authorities of accounts held by US clients. Otherwise, they would be taxed at source at a rate of 30 percent on earnings on US investments.

Germany, France, the UK, Italy, Spain and the US agreed in February 2012 to extend cooperation on efforts to combat tax evasion.

By September 2015 Germany aims to notify the US tax authorities for the first time about accounts held by US citizens and corporations. This notification will cover the year 2013. In return, the US pledges to provide partner states with tax-relevant information.

The bill implementing the accord is to be submitted to the German Bundestag, or lower house of parliament, in parallel to the signing of the agreement. It is expected that the legislation will be adopted ahead of the next parliamentary elections, to give German banks the legal certainty they need to make the necessary technical preparations.

TAGS: compliance | tax | investment | tax compliance | tax avoidance | FATCA | Luxembourg | Singapore | agreements | legislation | tax rates | France | Germany | Italy | Spain | Switzerland | United States | Compliance

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