Russia Still In A Panic Over FATCA

Russia’s still in a panic over the US government stalling talks over the Foreign Account Tax Compliance Act (FATCA).

The international tax network is triggered on July 1, 2014.

From that date any foreign banks and financial firms must report the status of any accounts and investments held by customers who are US taxpayers.

Failing to do so can result in a withholding tax on the bank or finance firm’s transactions passing through the US dollar system. US banks must keep back 30% of these transactions as a non-compliance tax.

Everything was going fine for Russia and FATCA until the crisis in Ukraine started. Moscow had indicated that the country would join FATCA and hundreds of banks and financial firms would report on UK taxpayer affairs accordingly.

Russia out in the cold because of Ukraine

But the US pulled the rug out from under Moscow by refusing to sign a tax information swapping agreement with Moscow despite offering the same option to around 70 other nations. Russia’s finance minister even flew to Washington to smooth the disagreement was turned away.

The result has left Moscow in a quandary – not obeying FATCA means massive fines for the nation’s banks, but not having an inter-government pact means each bank and financial firm has to report individually. This operation will cost Russian banks millions of dollars that could have been saved had the US agreed to a treaty as the banks would then report to the Russian tax authority, which would swap data with the Internal Revenue Service (IRS) in Washington.

On top of that, because no FATCA agreement is in force, Moscow is outside the loop on receiving reciprocal tax information about Russian taxpayers with bank accounts and investments in the US.

The Russian parliament is hastily reading a bill aimed at allowing banks and financial firms to register with the IRS under FATCA to try to avoid the withholding tax penalties.

More countries join FATCA network

Meanwhile, the latest nations to confirm FATCA agreements with the US include South Africa, Egypt and Andorra.

The IRS and US Treasury considers each of these countries as FATCA compliant.

FATCA affects millions of US taxpayers at home and abroad who have offshore bank accounts and investments adding up to more than $50,000.

So far, besides the 70 nations in the FATCA network, another 77,000 financial institutions worldwide have registered as FATCA-compliant on the IRS online portal.

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