The European Fund and Asset Management Association (EFAMA) is calling on the US government to extend its intergovernmental approach beyond the five countries listed in a recent joint statement.
The Foreign Account Tax Compliance Act (FATCA) is a sweeping law that requires non-US financial institutions, including funds, to determine which of their accounts and investors are US persons, and to report such US persons to the IRS. The consequence of non-compliance is a 30 percent withholding tax on payments of certain US source income.
On the 8th of February, 2012, the US Treasury Department and Internal Revenue Service (IRS) released long-awaited proposed regulations for FATCA. On the same day the proposed regulations were issued, the United States, along with the governments of France, Germany, Italy, Spain, and the United Kingdom, released a joint statement announcing a possible framework for intergovernmental agreements pursuant to which financial institutions would report the information required by FATCA to their local authorities, rather than directly to the IRS.
Commenting on the proposals, Peter de Proft, Director General of EFAMA, said:
“Although the proposed regulations address many of the difficulties faced by the funds industry, we hope that the regulations will be further refined as the US Treasury and IRS continue the process of moving toward final regulations. EFAMA will continue its dialog with the US government to ensure that the final regulations address the remaining issues of relevance to the European funds industry.”
Such agreements would be designed to solve local law privacy restrictions on providing information directly to U.S. tax authorities. EFAMA is hopeful that this approach will be expanded beyond the five countries that have been included in the joint statement.
EFAMA said it was gratified that the proposed regulations reflect the receptiveness of the US rule makers to working with EFAMA to develop operating rules under FATCA that are sensitive to the concerns and the needs of the European funds industry.
"We have had extensive dialog with the US Treasury and IRS with the shared goal of making the application of these rules workable for the funds industry. In particular, the proposed regulations are responsive to how European funds are structured and to the practical business realities of how funds operate. Most importantly, the proposed regulations build on EFAMA's proposals to treat many funds and their distributors as deemed compliant where they present a low risk of being a vehicle for U.S. tax evasion."
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