By Michael Cohn Washington, D.C. From Accounting Today

(September 24, 2015)
The U.S. government has signed “competent authority arrangements” with the United Kingdom and Australia to advance their intergovernmental agreements to combat tax evasion under the Foreign Account Tax Compliance Act, or FATCA.

The competent authority arrangements were signed in accordance with the “Agreement between the Government of the United States of America and the Government of Australia to Improve International Tax Compliance and to Implement FATCA” and the “Agreement Between the Government of the United States of America and the Government of the United Kingdom of Great Britain and Northern Ireland to Improve International Tax Compliance and to Implement FATCA”, IRS officials announced Thursday.

FATCA, which was included as part of the HIRE Act of 2010, requires foreign financial institutions to report on the holdings of U.S. taxpayers to the Internal Revenue Service, or else face stiff penalties of up to 30 percent on their income from U.S. sources. The law has attracted controversy at home and abroad. In an effort to smooth implementation, the U.S. Treasury Department has signed a series of intergovernmental agreements with tax authorities in a number of other countries in recent years, including the U.K. in 2012 and Australia in 2014. The agreements typically allow foreign banks to turn over the information to their own countries’ tax authorities, which in turn send it to the U.S.

A competent authority arrangement is a bilateral agreement between the U.S. and its treaty partners to clarify or interpret provisions of an existing tax treaty, such as the ones used to justify the intergovernmental agreements, or IGAs, under FATCA. The IRS recently extended some transitional rules for FATCA to give banks more time to adjust to the new regime (see IRS Extends FATCA Transition).

The competent authority arrangements, or CAAs, with Australia and the United Kingdom are the first to be signed. The U.S. Competent Authority expects that numerous other CAAs with additional competent authorities in IGA jurisdictions will be signed in the near future.

“The signing of these Competent Authority Arrangements marks another significant milestone in the international effort to gain proper reporting of offshore accounts and income,” said IRS Commissioner John Koskinen in a statement. “Together in partnership with other tax authorities, we are demonstrating how far we have come in the fight against offshore tax evasion.”

A list of all the intergovernmental agreements that are in effect can be found here. Financial institutions and host country tax authorities will use the International Data Exchange Service (IDES) as the secure electronic data transmission system to transmit and exchange FATCA data with the United States. Further information on IDES, including customer resources and support, can be found at source site (see link below). Individual taxpayers with foreign financial assets can find more information at source site (see link below).

IMAGE: John Koskinen

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