Lion City latest to sign up to help US combat tax evasion

PUBLISHED : Wednesday, 07 May, 2014, 1:08am
UPDATED : Wednesday, 07 May, 2014, 3:10pm

Singapore has reached a tax information-sharing agreement with the United States under a new law meant to combat offshore tax dodging by Americans, a US Department of the Treasury spokeswoman said.

Set to take effect on July 1, the Foreign Account Tax Compliance Act of 2010 (Fatca) will require foreign banks, investment funds and insurers to hand over information about Americans' accounts that have more than US$50,000 to the US Internal Revenue Service (IRS).

Foreign firms that do not comply face a 30 per cent withholding tax on their US investment income and could effectively be frozen out of US capital markets.

The Singapore deal, known as an intergovernmental agreement (IGA), was expected for more than a year and was significant because it broadened Fatca's dragnet to a major Asian financial centre, sources said.

Like most other Fatca deals, the Singapore agreement will allow Singapore firms to report US account-holder information to their local tax authority, which will send it along to the IRS. The Singapore deal was agreed "in substance" and must be finalised by the end of the year.

Financial firms in countries that have not reached a Fatca pact must report directly to the IRS and risk violating local privacy laws.

More than 60 IGAs have been negotiated to date, including deals with Indonesia, Peru and Kuwait announced in recent days, according to the treasury department's website.

In March, Secretary for Financial Services and the Treasury Professor Chan Ka-keung signed a tax information exchange agreement - a precursor to an IGA - with the US to allow Hong Kong to pass tax information of Americans working in Hong Kong to their US counterparts under Fatca.

Richard Weisman, of the Hong Kong office of law firm Baker & McKenzie, told the South China Morning Post at the time that China, as a G20 member state, would probably follow suit.

Fatca was enacted after a scandal involving Americans hiding money in Swiss bank accounts.