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South Africa, US In Talks On FATCA Agreement

by Lorys Charalambous, Tax-News.com, Cyprus

12 February 2013


South Africa’s National Treasury and the South African Revenue Service (SARS) have announced that they are opening negotiations with the United States to conclude an inter-governmental agreement (IGA) with respect to the latter’s Foreign Account Tax Compliance Act (FATCA).

FATCA was enacted by Congress in March 2010 and is intended to ensure that the US tax authorities obtain information on financial accounts held by US taxpayers with foreign financial institutions (FFIs). Failure by an FFI to sign an agreement with the US Internal Revenue Service and disclose information would result in a requirement, from next year, to withhold 30% tax on US-source income.

In July last year, the US released the model for an IGA for the automatic exchange of information between governments, as an alternative to individual FFI agreements.

It is intended that signing the IGA with the US Treasury Department would significantly reduce the compliance costs of South African FFIs, which would include South African banks, asset managers, private equity funds, long-term insurers and other participants in the financial sector.

“This would be achieved through the exchange of information between South Africa and the US on a reciprocal basis, in terms of the existing double taxation agreement between the two countries,” said a statement from the National Treasury and SARS.

“National Treasury and SARS have met with representative bodies for the affected FFIs to discuss the impact of FATCA,” the statement added. “These bodies expressed strong support for an IGS for the automatic exchange of information between South Africa and the US.”

South Africa has joined a growing number of jurisdictions that have either concluded or opened a dialogue with the US with a view to concluding an IGA. It has been disclosed that the US Treasury is engaged with more than 50 countries and jurisdictions in this way.

The National Treasury and SARS are requesting that comments and proposals, with respect to the negotiation of the IGS with the US, should be forwarded by February 28, 2013.

TAGS: South Africa | compliance | tax | investment | private equity | tax information exchange agreement (TIEA) | tax compliance | law | banking | tax authority | agreements | withholding tax | United States | Compliance | Africa

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