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Russia's Duma Adopts Law To Allow FATCA Disclosures

by Mike Godfrey, Tax-News.com, Washington

25 June 2014


The lower house of Russia's legislature, the State Duma, has approved a bill to enable financial institutions to comply with the United States's Foreign Account Tax Compliance Act (FATCA).

Enacted by the US Congress in 2010, FATCA, which will take effect from July 1, 2014, is intended to ensure that US authorities obtain information on accounts provided by foreign financial institutions (FFIs) to US persons. Failure by an FFI to disclose information about their US clients will result in a requirement to withhold 30 percent tax on payments of US-sourced income.

The bill, which was passed by the State Duma at first reading, allows Russian banks to transfer information about their customers to foreign tax authorities. It also requires banks based overseas to provide information on their Russian account holders to the Russian Federal Tax Service.

Russia and the United States had intended to sign an intergovernmental agreement (IGA) to facilitate the implementation of FATCA, but the US halted talks on the agreement in response to Russia's annexation of Crimea in March. In the absence of an IGA with the US, Russian lawmakers drew up new legislation to ensure that the country's financial institutions can still comply with FATCA. Russian institutions will instead have to communicate the relevant information directly to the Internal Revenue Service, rather than through a centralized authority.

Russian bank VTB said recently that it is reducing its offering for American clients to minimize its exposure to risks that could arise as a result of the lack of a bilateral FATCA IGA.

TAGS: Russia | Foreign Account Tax Compliance Act (FATCA) | tax | FATCA | law | legislation | United States | services | Compliance | Tax

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