NZ To Address FATCA Compliance Cost Concerns
15 May 2013
Posted by: Author: Mary Swire
Source: Mary Swire (Tax-News.com, Hong Kong)
The New Zealand Government has said that it is aware of compliance concerns regarding the Foreign Account Tax Compliance Act (FATCA) tax information exchange agreement (TIEA) currently being negotiated with the US.
FATCA was enacted by the US Congress in March, 2010. It requires Foreign Financial Institutions (FIIs) to enter into agreements with the US Internal Revenue Service (IRS) and Treasury, to provide details of financial accounts held by US taxpayers, or by overseas entities in which they hold a substantial ownership interest. Failure to disclose such information would result in a requirement to withhold 30 percent tax on US-source income.
Last October, New Zealand announced its intention to lodge an expression of interest in negotiating a FATCA intergovernmental agreement with the US. At the time, Revenue Minister Peter Dunne said that a deal would materially reduce FATCA compliance, and mean that financial institutions would not have to provide information directly to the IRS.
Talks are now underway. The TIEA will authorize New Zealand businesses to provide the Inland Revenue Department (IRD) with the required information, which will then be passed on to the US.
According to Dunne, New Zealand is negotiating the agreement on the same basis as its double tax and tax information exchange agreements. However, he did stress that the Government is "very aware of compliance cost issues and looking at how we can minimize any burden."
The agreement will be reciprocal, with the result that the US will also supply information about New Zealand investments in the US.
"FATCA is part of New Zealand’s commitment as a good global citizen to doing its bit to clamp down on tax evasion and an important way of doing that is through tax information exchange agreements that we regularly enter into," Dunne said.