Some European countries already agreed to report to their own government agencies rather than direct to the US government - will Asia follow suit?
ABF: Anything you’d like to add about the FATCA?
KPMG: Charles Kinsley, Principal for Tax and FATCA Team Head
While some welcome the government-to-government reporting, this could well exacerbate some of the uncertainties in the market place and further impact the time to compliance. While banks in Asia may see the upside of government-to-government reporting, they need to appreciate that given the time to compliance with the FATCA regulations and the time it may take for governments to get onboard, without further extensions being provided by the IRS, time is not on their side.
PwC: Timothy Clough, Hong Kong Risk & Controls Solutions Partner
The recently released proposed regulations may provide some relief (when compared to the FATCA guidance notes issued by the IRS during 2011) to Asian institutions in terms of extending the categories of foreign financial entities that may be deemed to be compliant with FATCA and raising the thresholds of customer account balances for institutions to identify and report US persons. Furthermore, one of the most significant challenges in the FATCA guidance notes and one that is causing particular concern across the industry, pass-thru payments, has been further deferred until 1 January 2017, allowing the IRS to consult further with the industry on potential workable solutions. However, the proposed regulations generally do not delay the existing effective dates for FATCA compliance and complying with FATCA will still require a significant amount of effort from many Asian institutions.
A further development announced by the US Treasury on the 8 February 2012 is that the US is now working with Britain, France, Germany, Spain and Italy on ways to report information on US account holders through their own government agencies rather than direct to the US government. Although Asian countries are not currently involved the outcome could pave the way for FATCA to develop into a global blueprint for addressing the enforcement of various countries' tax laws. It may also drive the establishment of an effective framework for addressing certain privacy law concerns in different countries and the support the ability of institutions to withhold on non-FATCA compliant institutions.
To conclude the FATCA regulations are not yet final and there is still time for Asian institutions to provide comment. The timeframe for the submission of comments to the US authorities is 30 April 2012 and a public hearing will be held on the 15 May 2012 in the US. Across Asia we are seeing many institutions come together under the umbrella of their industry bodies to understand the impact of FATCA on their particular sector of the industry and in some instances collectively determine industry solutions. Whilst we expect that there will be continued debate on the technicalities of the proposed regulations and the challenges of implementing processes and procedures necessary for FATCA compliance, we do not anticipate any significant diversion from the US authorities primary objective of tackling US tax evasion.
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