SINGAPORE: Singapore finalised an information sharing agreement with the United States before the end of 2014 on Tuesday, aimed at combating offshore tax dodging.
The pact was agreed in principle in May, but had to be finalised before the end of 2014 so that firms could take advantage of it come January when they have to start abiding by the Foreign Account Tax Compliance Act of 2010. The deal will make it much easier for financial institutions in one of Asia’s biggest wealth management centres to comply with US tax law.
Further under FATCA, foreign banks, investment funds and insurers have to hand over information to the U.S. Internal Revenue Service (IRS) about accounts with more than $50,000 held by Americans.
Foreign firms that do not comply face a 30 percent withholding tax on their US investment income and could effectively be frozen out of US capital markets.
Tuesday’s agreement means that firms in Singapore can report US account holder information to the local tax authority, which will send it to the IRS, saving them from dealing directly with US tax authorities.