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Macau, US Sign FATCA Agreement

by Mary Swire,, Hong Kong

20 December 2016

On December 14, Macau and the United States signed an intergovernmental agreement (IGA) to facilitate compliance with the US Foreign Account Tax Compliance Act (FATCA) by financial institutions (FIs) in Macau.

FATCA, which was enacted by the US Congress in 2010 and took effect on July 1, 2014, is intended to ensure that the US Internal Revenue Service (IRS) obtains information on financial accounts held at foreign financial institutions (FFIs) by US persons. Failure by an FFI to disclose information on their US clients results in a requirement to withhold 30 percent tax on payments of US-sourced income.

To address situations where foreign law would prevent an FFI from complying with the terms of an FFI agreement, the US Treasury developed model IGAs. Under the terms of the Model 2 IGA between the United States and Macau, the substantive terms of which were agreed in November 2014, FIs in Macau need to register and conclude separate individual agreements with the IRS.

The IGA grants exemptions for FIs or their products which present low risks of tax evasion by US taxpayers, but other FIs in Macau need to seek consent from their US account holders for the reporting of their account information to the IRS annually.

Macau's FIs have been reminded by the Government to assess FATCA compliance implications for their operations and clientele and to "have the procedures and systems in place to protect clients' monies, investments, or other interests in financial instruments from withholding by third parties, and to avoid aiding clients to engage in tax evasion, locally or overseas."

The FIs' individual agreements with the IRS is supplemented under the IGA by the exchange of information on relevant US taxpayers at government level on an as-needed basis and upon request.

TAGS: compliance | tax | investment | interest | FATCA | law | Macau | Internal Revenue Service (IRS) | agreements | United States | Compliance | Tax

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