The Foreign Account Tax Compliance Act (FATCA) is a United States (US) law which requires all financial institutions outside the US (also known as Foreign Financial Institutions, or FFIs) to periodically transmit information about financial accounts held by US persons to the US Internal Revenue Service (US IRS). FACTA was enacted by the US to deter and detect tax evasion by US persons using foreign financial accounts.
FFIs can include banks, insurance companies, investment managers and custodians. FFIs that fail to comply with the reporting obligations under FATCA will face a 30% withholding tax on certain payments made from the US.
As FFIs may face hurdles in certain jurisdictions in complying with FATCA due to conflicts with domestic banking secrecy and privacy laws, the US has entered into intergovernmental agreements (IGAs) to enable financial institutions to disclose the required account information.
Singapore and US IGA
Singapore and the US have signed a FATCA Model 1 IGA on 9 Dec 2014. With the IGA, Singapore-based financial institutions (FIs) will benefit from simplified compliance procedures with regard to identifying and reporting on financial accounts held by US persons. Singapore-based FIs will also avoid FATCA-related withholding tax on relevant payments that they receive from the US.
The Model 1 IGA allows Singapore-based FIs to report account information of US persons to the Inland Revenue Authority of Singapore (IRAS), which will in turn provide the information to the US IRS.
A copy of the IGA is available here.
Registration by 22 December 2014
Singapore-based FIs can now register as a “Registered Deemed-Compliant Financial Institution (Including a Reporting Financial Institution under a Model 1 IGA)”. Singapore-based FIs should register with the US IRS and obtain a Global Intermediary Identification Number by 22 December 2014 to be included on the US IRS FFI List by 1 January 2015.
Registration can be done at the FATCA Registration Portal.
Further guidance will be provided by January 2015 by the IRAS, the Monetary Authority of Singapore and the Ministry of Finance to Singapore FIs on how to comply with their FATCA obligations.