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Asia is a Huge Hurdle for Fatca Agreements!

While the US is pushing to sign up as many countries as possible to an IGA, for Hong Kong & China signing an IGA appears less appealing. Speaking at a PwC Fatca roundtable in Hong Kong on February 6, Anthony Tong, US tax consulting leader for Greater China, said it is the US that would gain the most benefits from such an agreement – as it would be onerous for China to comply with no obvious benefit.

For Fatca to be effective against tax evasion, it needs to be implemented worldwide, said Tim Clough, risk and assurance partner at PwC. "Fatca needs to be established globally and with all financial institutions, otherwise there will be arbitrage," Clough said.

Although China was not on a list of 50 countries the US Treasury said it was in negotiations with for signing an IGA in November last year, market sources believe that the US is actively engaging with the Asian state to come to an agreement behind the scenes.

No country in Asia has yet signed up to an IGA. Japan is in the process of finalising its agreement while Australia, New Zealand, Malaysia, Singapore, India and Korea are believed to be actively engaged with the US Treasury over this issue.
There is little incentive for Chinese authorities to sign an intergovernmental agreement (IGA) to enable China’s financial institutions to comply with Fatca, as any benefits to it from an exchange of information with US tax authorities are likely to be minimal, say consultants.

"Under Chinese law there are a lot of bankruptcy protection rules, so that under the current Fatca rules it would be very difficult for Chinese financial institutions to try to comply. Even if the account holders were to waive those privacy protections, there are still laws that would make it illegal to report that information to the US government.

Speaking at the same briefing, PwC US tax partner Angelica Kwan said "In Hong Kong there is a lot of misinformation about IGAs and some institutions believe that if Hong Kong signed an IGA, it would save them from having to comply with Fatca. While it may make Fatca easier to comply with under an IGA, it is still essentially the same framework," she said.

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Source:

Risk.net

Read more at: Tax Times blog

 
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