US Agrees on New Info Sharing Rules

July 27, 2012 International Tax Cooperation

Tax Information ExchangeWASHINGTON D.C. – America has reached agreements with five European countries regarding new international reporting rules which will comply with the USA’s Foreign Tax Compliance Act.

On July 26th a joint statement was released by the USA, the UK, France, Germany, Italy and Spain, announcing that the group of countries had unanimously agreed to implement new reporting rules which will facilitate the automatic exchange of information on taxpayers with bank accounts in any of the participating countries.

The new rules are set out in a model tax agreement which can be signed by any country which already has a tax information exchange agreement with the USA. The new reporting rules are intended to supplement the USA’s Foreign Tax Compliance Act (FACTA), which was implemented in 2010 and was intended to hamper the ability of American taxpayers to evade their tax obligations by using overseas bank accounts.

Under the scope of the new reporting rules, all signing countries agree to a set of standard reporting rules and will be required to automatically provide the USA with data on US taxpayers who have foreign bank accounts holding over USD 50 000 in assets. As part of the agreements, the US Internal Revenue Service will reciprocate and provide tax authorities in the signing countries with information on taxpayers who hold bank accounts in the USA. The exact reporting threshold for the US will be determined by the nationality of the account holder, and the details of the exchange agreement between the US and the country.

Tax experts in the USA have praised the new agreement, saying that the reporting rules will make it much easier for banks and financial institutions across the world to comply with international law on tax evasion.

Commenting on the newly reached accords, the Secretary of the US Treasury Tim Geithner said that “…today’s announcement is an important milestone in our joint efforts to combat offshore tax evasion and make our tax systems more efficient and fair.”

Photo by Domiriel