Tax deal with US a win for China, lawyers say
China stands to benefit from a proposed intergovernmental agreement (IGA) with the United States that would enable the mainland to comply with the US Foreign Account Tax Compliance Act (Fatca), which combats tax evasion, lawyers say.
China stands to benefit from a proposed intergovernmental agreement (IGA) with the United States that would enable the mainland to comply with the US Foreign Account Tax Compliance Act (Fatca), which combats tax evasion, lawyers say.
Fatca requires foreign financial institutions to report to the US Internal Revenue Service information about US taxpayers or foreign firms in which US taxpayers hold substantial ownership.
One of the agreement's features is the exchange of tax information between the US and the other signatory jurisdiction.
Beijing and Washington agreed in July to reach an IGA before January.
"If China signs a reciprocal IGA, it could receive significant tax data from the US about the overseas activities of Chinese nationals," said Karl Egbert, a registered foreign lawyer with US law firm Dechert. "That data is potentially tremendously valuable to the Chinese government, so they will not want to jeopardise the agreement.
China [wants to] know what’s happening with its citizens’ offshore money
"If China and the US can agree to an IGA, it means they have found a common cause. Both countries are very interested in what their citizens do offshore; the US because it operates a global tax system, and China because it would like to control the flow of currency and know what's happening with its citizens' offshore money.