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South Africa, US Conclude FATCA IGA

by Lorys Charalambous,, Cyprus

12 June 2014

On June 9, 2014, South African Finance Minister Nhlanhla Musa Nene and the US Ambassador to South Africa, Patrick H. Gaspard, signed an inter-governmental agreement (IGA) to support international efforts to improve tax compliance.

The agreement includes provisions allowing the reciprocal exchange of information, which requires that financial institutions in South Africa report information about US account holders to the South African Revenue Service (SARS). SARS will in turn relay that information automatically to the US's Internal Revenue Service (IRS) under the US/South Africa tax treaty. On a reciprocal basis, the IRS will provide information about South African account holders in the US to SARS.

In July 2012, the United States introduced the option of a country entering into an inter-governmental agreement, which would alleviate the need for financial institutions to enter directly into an agreement with the United States.

South African Finance Minister Nene said: "South Africa is committed to automatic exchange of information for tax purposes and to thereby make the world a more transparent place from a tax perspective."

"This commitment has been expressed through South Africa's role in both the G20 and the Global Forum on Transparency and Exchange of Information for Tax Purposes. Implementing FATCA is South Africa's first step in AEOI and will lay a sound foundation in extending AEOI to other treaty partners," he added.

Ambassador Gaspard, who signed the agreement on behalf of the US, said: "The signing of these agreements is an important step forward in the collaboration between the United States and South Africa to combat tax evasion."

"When taxpayers overseas avoid paying what they owe, other taxpayers have to bear a disproportionate share of the tax burden. The intergovernmental Agreement to Improve International Tax Compliance and to Implement FATCA is an important part of the U.S. government's effort to address that issue," he added.

TAGS: South Africa | compliance | Finance | tax | tax compliance | FATCA | Internal Revenue Service (IRS) | agreements | United States | G20 | Compliance | Africa | Tax

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