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Talk of the Day -- Taiwan aims to sign tax pact with U.S. on FATCA

Talk of the Day -- Taiwan aims to sign tax pact with U.S. on FATCA

Taiwan is seeking to sign a tax information exchange agreement with the United States to help local financial institutions meet tax-reporting requirements under Washington's 2010 Foreign Account Tax Compliance Act (FATCA), according to media reports. The reports said the Executive Yuan has authorized the Ministry of Finance to negotiate a pact with the U.S. Treasury Department that will pave the way for the enforcement of the U.S. act that targets offshore tax evasion by American taxpayers. FATCA was enacted in 2010 after an outcry over a Swiss banking scandal that revealed U.S. taxpayers had concealed millions of dollars in assets from the Internal Revenue Service (IRS) overseas. The act requires foreign financial institutions to tell the IRS, which is under the U.S. Treasury Department, about offshore accounts held by American citizens worth more than US$50,000. To facilitate enforcement of the new law, which will take effect from 2013, the United States has signed tax information sharing or exchange agreements with several countries, including the United Kingdom, Denmark and Mexico, the reports said. Such agreements are seen as offering a more practical way to implement the FATCA because they allow foreign financial institutions to report information about American account holders to the IRS through their home governments instead of forcing the institutions to deal directly with the U.S. tax bureau. According to media reports, hundreds of thousands of Taiwan residents with U.S. citizenship or green cards may be affected by the new law. The following are excerpts from a special report in the Monday edition of the United Evening News on the FATCA issue: Under the regulation, people with U.S. citizenship or green cards or those who have worked in the U.S. for more than 183 days annually over the past three years will have to report all of their overseas assets held in 2013 when they file their taxes in 2014. An estimated hundreds of thousands of Taiwan residents with U.S. citizenship or green cards may be taxed under FATCA. Some of them have already begun "adjusting assets" by dispersing them legally to reduce their tax liabilities, financial sources said. Local financial institutions have begun collaborating with four major accounting companies -- Deloitte, KPMG, Diwan & Company and PwC Taiwan -- to sort out bank accounts that may be subject to tax-reporting requirements under FATCA. The FATCA is an important development in U.S. efforts to improve tax compliance involving foreign financial assets and offshore accounts, financial analysts said. Under FATCA, U.S. taxpayers with specified foreign financial assets that exceed US$50,000 must report those assets to the IRS. In addition, FATCA requires foreign financial institutions to report to the IRS information about financial accounts held by U.S. taxpayers, or held by foreign entities in which U.S. taxpayers hold a substantial ownership interest. According to banking sources, the U.S. tax information exchange pact with the U.K. is based on a model agreement developed in consultation not just with London but the governments of France, Germany, Italy and Spain. All five European countries are planning to copy the U.S.-originating FATCA to prevent their wealthy people from evading taxes. A recent Reuters report quoted a U.S. treasury official as saying that the U.S. will sign similar tax information-sharing deals with more countries in the hope of creating a new global regulatory system to prevent Americans from dodging taxes through foreign accounts, including a plan to obtain U.S. taxpayer information through foreign governments. (Dec. 24, 2012) (By Sofia Wu)

Updated : 2021-11-30 06:38 GMT+08:00