NZ to negotiate intergovernmental agreement on FATCA
The Minister of Revenue recently announced that the Government will look to enter into an Intergovernmental Agreement (IGA) with the US Government on FATCA requirements.
In terms of background, the Foreign Account Tax Compliance Act (FATCA) was enacted in the United States in 2010, and requires overseas financial institutions (e.g. banks, life insurers or managed funds) to enter into agreements with the US’s Internal Revenue Service (IRS) and US Treasury to provide details about the affairs of their United States clients. (See our previous Alert article on FATCA). Without an IGA, financial institutions would be required to withhold tax on certain client accounts (a withholding tax of 30% would be applicable), and risk being in conflict with New Zealand’s privacy and human rights laws.
An IGA would materially reduce FATCA compliance for New Zealand financial institutions, and will ensure that information does not have to be directly provided to the IRS. Under an IGA, financial institutions would provide information to Inland Revenue who would then submit the data on their behalf to the IRS.
A joint working group comprising private sector representatives and officials is being formed to work through FATCA issues. The approach taken by the New Zealand Government is similar to the Australian approach which was announced in August.
Tax Alert November 2012 Contents:
- Tax Alert - November 2012
- The binding rulings process – the price of certainty
- New Zealand’s foreign trust rules – legitimate tax avoidance?
- Penny & Hooper - extended timeframe for voluntary disclosure concession
- Update on salary trade-off reforms
- Inland Revenue’s approach to time of supply has far reaching implications for GST registered persons
- The most significant case in Australia about the definition of “Supply”
- Upcoming Dbrief on Australian transfer pricing reform
- Bill passes its third reading