Banks here to help US catch American tax cheats
THE long arm of a United States financial reporting law aimed at clamping down on tax evasion by Americans using overseas accounts will soon be extended to Singapore's shores.
The law, the Foreign Account Tax Compliance Act (Fatca), which takes effect on July 1, will require financial institutions around the world to regularly submit financial information about their US clients to the US taxman.
In Singapore's case, banks here are set to provide the information to the Inland Revenue Authority of Singapore (Iras) which will then pass it to its US counterpart, the Internal Revenue Service (IRS).
Singapore and US regulators announced yesterday that they have substantially concluded discussions on an inter-governmental agreement that will facilitate compliance with Fatca.
Banks here will have to provide information on all US persons with accounts exceeding US$50,000 (S$62,000).
Failure to comply with the reporting requirements will result in the US government imposing a 30 per cent withholding tax on payments made to the banks that breach the US rules.
Singapore has opted for one of two models designed by the US for supplying this banking information to the authorities.
This involves foreign financial institutions providing the account information to their relevant domestic authority, in Singapore's case, Iras, which will in turn pass on the information to the IRS.
The other financial reporting model requires the financial institution to directly report the account information of Americans to the IRS.
The Finance Ministry, Monetary of Singapore and Iras said in a joint statement yesterday: "Transmitting this information through Iras helps to ease the compliance burden for our financial institutions as their reporting obligations would be deemed met once they have transmitted the information to Iras."
Singapore is expected to sign the agreement later this year, while banks have until Dec 31 to register with the US authorities.
Banks would have to backdate their submission of data to July 1.
Countries that have already signed on to the deal include Australia, Canada and Britain.
Jim Calvin, the Asia-Pacific financial services industry tax leader for Deloitte South-east and Asia Pacific, said: "Singapore is likely to be one of the only jurisdictions in South-east Asia to have an inter-governmental agreement with the US before July 1.
"This is a clear competitive advantage and Singapore will be recognised as one of the, if not the, most mature and nimble financial centres in Asia."
Banks here are preparing for the change.
A United Overseas Bank spokesman said: "We are monitoring the developments on Fatca very closely and are reviewing the bank's processes, such as client on-boarding, management and reporting of client information."
A DBS Bank spokesman said one top priority is to minimise the impact on customers: "Our staff are also being trained on Fatca requirements and the new procedures to ensure that they are able to assist where they can with customers' queries."