India is the latest big economy to join the Foreign Account Tax Compliance Act (FATCA) network.
The Indian government has pledged to sign an inter-governmental agreement and has been fully accepted by Washington as a FATCA compliant nation.
The nation’s regulator SEBI plans to issue guidelines to Indian financial institutions within a few weeks.
FATCA is an international automatic tax reporting network comprising more than 50 countries worldwide.
Nations that have signed up to FATCA will swop financial information on the bank accounts and investments held by US taxpayers with the US Internal Revenue Service (IRS) in return for similar financial data about their own taxpayers from the US.
Russia frozen out of FATCA
The law affects US taxpayers controlling holdings of more than $50,000 at the end of each tax year.
Foreign financial institutions must start reporting financial data under FATCA from July 1, 2014.
Failure to do so could mean sanctions from the US Treasury demanding US banks grab a 30% withholding tax from any non-compliant financial institutions dealings in the US.
Russia’s continuing rearguard action to avoid FATCA sanctions is amounting to almost a surrender.
Finance minister Anton Siluanov was blanked by Treasury Secretary Jacob Lew on a visit to Washington to sign a FATCA agreement over Russia’s aggressive stance in The Crimea and Ukraine.
The fear is now Russia has no inter-governmental agreement with the US; Russian banks may face sanctions for operating outside of the network.
To try to avoid financial disaster, Siluanov is drafting new laws to allow Russian banks to work inside FATCA without government interference.
His problem is any new laws must be passed in to for Russia’s banks to sign up to FATCA by May 5, the deadline for compliance.
While Russia is facing obstacles from the US, tiny Bahamas has signed an inter-governmental agreement with Washington to become a fully compliant FATCA nation.
Another nation lining up FATCA compliance is The Philippines. Bureau of Internal Affairs commissioner Kim S. Jacinto-Henares has announced the tax authority is awaiting approval of special powers from the government to join the network.
FATCA was devised as a method of capturing US taxpayers with offshore bank accounts and investments after a major Swiss banking scandal revealed thousands of American clients had been helped to evade taxes by hiding behind a veil of secret banking laws.