By: Treasury Insider
Last month, the Foreign Account Tax Compliance Act (FACTA) came into effect, forcing overseas banks that accept US payments to disclose account information to the IRS or face 30% withholding tax. The OECD has now introduced Automatic Exchange of Information (AEOI) guidelines to help countries standardise these rules for non-US transactions.
Nicknamed “GATCA”, the 300 pages of guidelines are essentially a globalised version of FATCA, issued in response to calls from other countries that wanted a way of exchanging FACTA-style information between themselves. 65 countries and independent jurisdictions have now said that they will adopt the practice, with 40 of these signing up to be early adaptors.
There are, though, some significant differences between the two approaches. Firstly, because it is not geared predominantly towards benefitting one country (as FATCA is) GATCA is fully reciprocal, and is based on the residency of the account holder, rather than their citizenship. Whereas the terms and scope of FATCA had to be laboriously re-negotiated with individual countries, GATCA will be standardised, without allowing for country-specific exemptions. In many ways, GATCA is more straightforward than FATCA. (…)
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