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Taiwan, US To Negotiate FATCA Agreement

by Mary Swire,, Hong Kong

08 April 2013

On April 2, 2013, the Taiwanese Financial Supervisory Commission (FSC) and Ministry of Finance (MOF) jointly announced that both agencies and the United States Treasury Department had reached a consensus to pursue an intergovernmental agreement (IGA) to facilitate the implementation of the Foreign Account Tax Compliance Act (FATCA).

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

It is intended that signing an IGA with the US Treasury would significantly reduce the compliance costs for Taiwanese FFIs, and it is known that the US Treasury is engaged with more than 50 countries and jurisdictions in this way.

The talks concerning the IGA have been held under the auspices of the American Institute in Taiwan and the Taipei Economic and Cultural Representative Office in the US. To cope with issues resulting from FATCA, an interagency task force including the FSC, the MOF, the Ministry of Justice and the Ministry of Economic Affairs was formed.

FFIs are concerned about the FATCA legislation, particularly the changes to their systems it will entail and the penalties that will ensue in case of non-compliance. Therefore, in addition to the consultations between that task force and the US Treasury, Taiwanese efforts have also been dedicated to assisting local financial institutions in complying with all domestic legal requirements and protecting their depositors and investors.

Taiwan's authorities stressed that they are supportive of the underlying goals of FATCA, and are interested in exploring a framework for mutual cooperation to facilitate its implementation. Both sides have affirmed their willingness to continue their consultations and actively seek to finalize the signing of an agreement.

TAGS: compliance | Finance | tax | tax compliance | FATCA | law | banking | financial services | Taiwan | Internal Revenue Service (IRS) | ministry of finance | tax authority | legislation | withholding tax | United States | penalties | services | Compliance

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