Opinion | Funds have battle with US Fatca rules
Asia's funds can celebrate the deferral of harsh new Fatca rules, but they still face a tough fight
Hong Kong and Asia fund managers can celebrate as the US Treasury and Internal Revenue Service last week agreed to postpone a new US tax law from January next year to January 2014.
But industry players warn against breaking out the champagne too soon as no agreement has been reached to exempt the thousands of retail and pension funds in Asia. It seems more lobbying will be needed.
For those who are not familiar, here is an introduction.
The United States initially wanted to impose the Foreign Account Tax Compliance Act (Fatca) in January. It aims to prevent wealthy Americans from dodging their tax liabilities by requiring all companies and banks that do business with US clients to disclose information about assets.
The rules were supposed to target US citizens but it would put a burden on all Hong Kong and Asian fund managers because they were faced with onerous reports to the IRS.
Any Hong Kong or other non-US financial institutions that failed to co-operate faced a 30 per cent withholding tax on their US-sourced income.
That was not funny, so the Hong Kong Investment Funds Association (HKIFA) and five fund bodies in the region earlier this year jointly lobbied US tax authorities for an exemption for funds such as Hong Kong's Mandatory Provident Fund.