New Zealand has signed an inter-governmental agreement (IGA) with United States for the implementation of the Foreign Account Tax Compliance Act (FATCA).
The IGA will combat offshore tax dodging by the US citizens as well as reduce compliance costs to financial institutions in New Zealand.
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The agreement was signed between revenue minister Todd McClay and US Charge d’ Affaires Marie Damour in New Zealand.
The IGA, which is reciprocal, will make it easier for New Zealand financial institutions to comply and thereby reduce extra costs to New Zealand customers.
Under the agreement, New Zealand financial institutions will provide information to (New Zealand’s) Inland Revenue, who will then exchange it with the IRS.
The IGA will simplify the reporting process and allow the New Zealand government to implement rules to require and allow New Zealand financial institutions to comply with their FATCA.
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By GlobalDataMcClay said: "The IGA is reciprocal, meaning that New Zealand will also receive information about certain accounts held by New Zealand residents with U.S. financial institutions. This will help prevent tax evasion and enhance the integrity of both countries’ tax systems."
The IGA imposed no extra taxes or changed taxing rights, but simply enabled New Zealand financial institutions to comply with US law," McClay added.
The FATCA law, which was enforced by Congress in 2010, requires information reporting and withholding tax provisions that target non-compliance by US taxpayers using foreign accounts.
The foreign companies could be charged with a 30% withholding tax on their US investment income. Non compliance with the act will lead to freezing of company accounts in US capital markets.
