The local government and the United States of America (U.S.) yesterday signed an inter-governmental agreement (IGA) which aims at facilitating compliance with the U.S. Foreign Account Tax Compliance Act (FATCA) by financial institutions in the MSAR.
The agreement essentially requires financial institutions to report relevant account information of U.S. taxpayers directly to the U.S. Internal Revenue Service (IRS), and supplemented by group requests made by the U.S. IRS on a needs basis.
FATCA is an anti-tax evasion regime enacted by the U.S. to detect U.S. taxpayers who use accounts with non-U.S. financial institutions to conceal income and assets from the U.S. IRS. It requires financial institutions based outside of the U.S. to report financial account information of U.S. taxpayers to the U.S. IRS. Failing this, relevant institutions face repercussions in the form of a withholding tax imposed by the U.S. IRS on relevant U.S.-sourced payments to them.
Under the IGA, financial institutions in Macau are required to register and conclude separate individual agreements with the U.S. IRS. Under the agreements, these institutions shall seek the consent of their U.S. taxpaying account holders to report their account information to the U.S. IRS annually.
According to a statement issued yesterday by the Monetary Authority of Macao, the IGA reduces the reporting burden and facilitates compliance with FATCA by financial institutions in Macau SAR. It covers exemptions for financial institutions or products which present a low risk of tax evasion by U.S. taxpayers.
“Financial institutions are reminded to assess their relevant FATCA compliance implications for their operations and clientele. They shall have the procedures and systems in place to protect clients’ monies, investments or other interests in financial instruments from withholding by third parties; avoid aiding clients to engage in tax evasion locally or overseas; and promote the orderliness of market operation,” the statement reads.
The two governments were represented at the signing ceremony held yesterday by the Secretary for Economy and Finance, Lionel Leong, and the Consul-General of the U.S. to Hong Kong and Macau, Kurt Tong.
The IGA is available on the Monetary Authority of Macao’s website.