The governments of the US and the UK have signed a bilateral agreement to implement the US Foreign Account Tax Compliance Act (FATCA).
FATCA, which was enacted in 2010 by US Congress to target non-compliance by American taxpayers using foreign accounts, requires foreign financial institutions (FFI’s) to report to the internal revenue service information about accounts held by US taxpayers, or foreign entities in which US taxpayers hold a significant ownership interest.
The agreement signed on September 12 is based on a model intergovernmental agreement published in July this year.
The July model that was developed in consultation with France, Germany, Italy, Spain and the UK establishes a common approach to combatting tax evasion based on the automatic exchange of information.
The bilateral agreement will benefit UK financial institutions by addressing their legal concerns with complying with FATCA.
David Gauke, exchequer secretary to the treasury, who signed the agreement on behalf of the UK, said: “This agreement demonstrates our commitment to working internationally to tackle tax evasion. It is the first of its kind and represents a significant step forward in the scope and nature of information exchange between governments. Furthermore, the changes we have achieved to FATCA implementation will provide significant benefits to UK financial institutions.”
The US Treasury’s assistant secretary for tax policy, Mark Mazur, said: “[The] announcement marks a significant step forward in our efforts to work collaboratively to combat offshore tax evasion,”
“We are pleased that the United Kingdom, one of our closest allies, is the first jurisdiction to sign a bilateral agreement with us and we look forward to quickly concluding agreements based on this model with other jurisdictions.”
The treasury department plans to conclude similar bilateral agreements to implement FATCA with several other governments in the near future.
