Hong Kong and the US have substantially concluded discussions on an inter-governmental agreement (IGA) that will facilitate compliance with the US Foreign Account Tax Compliance Act (FATCA) by financial institutions in Hong Kong.
Following the completion of the substantive discussions, Hong Kong and the US are expected to sign a Model 2 IGA later in 2014.
Under the IGA, financial institutions in Hong Kong will need to register and conclude separate individual agreements with the US IRS. Under these agreements, these institutions will seek consent of their account holders who are US taxpayers for reporting their account information to the US Internal Revenue Service (IRS) annually.
A spokesperson for the Hong Kong’s Financial Services and the Treasury Bureau said: “The IGA demonstrates Hong Kong's commitments to enhancing tax transparency in the international arena. It will lower overall compliance costs for the industry and safeguard the interests of these institutions and their clients."
The operation of the Model 2 IGA will be supplemented by exchange of information on relevant US taxpayers at the government level on a need basis and upon request, pursuant to a tax information exchange agreement signed between Hong Kong and the US in March 2014.
Steve Engdahl, senior vice president of product strategy at data management provider GoldenSource, said: “We’re pleased to see China become the latest region to sign up to FATCA. With the deadline just around the corner, the majority of nations are now on-board, although certain IGAs are still waiting to be signed by other countries.”
“As the deadline passes, it is no longer good enough for financial institutions to address FATCA challenges just for today. Firms need to adopt a more forward-looking approach to make the most of their FATCA data."
"This requires a solution that works across all critical data sets, not just customer data. It should really be seen as an opportunity for financial institutions to harvest new insights about client behaviour to gain a competitive edge.”
