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Singapore, US Reach FATCA Agreement

by Mary Swire,, Hong Kong

08 May 2014

It has been announced that the United States and Singapore have substantially concluded discussions on, and have initialed the text of, an intergovernmental agreement (IGA) to implement the Foreign Account Tax Compliance Act (FATCA).

FATCA, enacted by the US Congress in 2010 and, taking 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 will result 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, US Treasury has developed model IGAs. Under the terms of the Model 1 IGA between Singapore and the US, Singapore-based financial institutions will report information on financial accounts held by US persons to the Inland Revenue Authority of Singapore (IRAS), which will then exchange the information with the IRS.

Transmitting this information under the terms of the IGA will help to ease the compliance burden for financial institutions as their reporting obligations will be deemed met once they have transmitted the information to IRAS.

Following the initialing of the IGA, the parties expect to sign the agreement in the second half of 2014. Singapore-based financial institutions will now have until 31 December 2014 to register as an FFI within an IGA jurisdiction and obtain a Global Intermediary Identification Number at the IRS's online FATCA registration portal. This will ensure that there is no FATCA-related withholding tax on payments made to them from the US.

It was also emphasized that Singapore-based financial institutions will need to develop system applications to collate the required data in accordance with the data format set out by the US IRS, and that the finalized intergovernmental FATCA XML Schema and User Guide, which provides information on specific data elements and their attributes, are available on the IRS website.

Further guidance will be provided in the second half of 2014 by IRAS, the Monetary Authority of Singapore and the Ministry of Finance to financial institutions on how to comply with their FATCA obligations. The Ministry of Finance will hold a public consultation on the draft guidance before it is finalized.

TAGS: compliance | Foreign Account Tax Compliance Act (FATCA) | tax | FATCA | law | banking | financial services | Singapore | Internal Revenue Service (IRS) | tax authority | agreements | legislation | withholding tax | United States | services | Compliance | Tax

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