WSJ: U.S. Initials Deal With China to Curb Offshore Tax Evasiononline. wsj.com/articles/u-s-initials-deal-with-china-to-curb-offshore-tax-evasion- 1403815952?tesla=y&mg=reno64-wsj
June26, 2014 4:52 p.m. ET
WASHINGTON—The U.S. Treasury said it initialed an agreement with China to help implement a2010 federal law aimed at curbing offshore tax evasion.
The two countries agreed on the terms, but are scrutinizing the fine print before officially signing it. The move helps the U.S. government's effort to put the complex regulatory plan into practice while avoiding disruptions in commercial transactions with other major economies.
The law requires foreign banks to start turning over information about U .S.-owned accounts to the Internal Revenue Service. It would force banks around the world to withhold a share of many types of payments to any institutions that aren't in compliance with the law, the Foreign Account Tax Compliance Act, or Fatca.
The U.S. has been signing agreements with foreign governments to help implement the law. The agreements allow banks to turn over account information to their own governments instead of handing it directly to the U .S.—a potential violation of privacy rules in some countries. The U.S. has signed or initialed agreements with about80 countries, including almost all major economies, a senior Treasury official said.
The U.S. and China entered into a type of reciprocal agreement that will give the U.S. government information on U.S.-owned financial accounts, and the U.S. in turn will provide banks' information on Chinese residents' U.S. accounts.
Chinese officials in the past have expressed concerns privately about the potential burdens of complying with Fatca. But the U.S. has used the intergovernmental agreements to simplify compliance.
Still, significant challenges remain in getting the global information- reporting system up and running. Around80,000 banks and other financial institutions have agreed to start reporting the data on U.S.-owned foreign accounts. But banks have been nervous about being ready by the July1 start date.
The U.S. recently announced it would ease enforcement for2014 and 2015. The government said as long as firms are making a good-faith effort to comply, the U.S. won't rigorously enforce many of the requirements in 2014 and 2015.
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