The United States Treasury Department has issued a joint statement with Japan, and a joint statement with Switzerland, for intergovernmental cooperation in the implementation of the U.S. Foreign Account Tax Compliance Act (FATCA).
In both Japan and Switzerland, financial institutions may not be able to comply with all of the reporting, withholding and account closure requirements of FATCA, due to legal or contractual impediments in those countries. Both governments, however, support intergovernmental cooperation to address the impediments and simplify practical implementation of FATCA.
Japan is supportive of the underlying goals of FATCA, and is interested in exploring a framework for intergovernmental cooperation to facilitate the implementation of FATCA and improve international tax compliance. The U.S. affirms its willingness to cooperate with Japan by collecting and exchanging information under the existing income tax convention on accounts held in U.S. financial institutions by residents of Japan. Under a new Framework which the authorities have agreed to explore, the Japanese authorities would direct and enable financial institutions in Japan, not otherwise exempt or deemed compliant pursuant to the Framework, to register with the IRS and confirm their intention to comply with official guidance issued by the Japan Financial Services Agency that is consistent with the obligations of participating Foreign Financial Institutions (FFIs) under FATCA, and would accept and promptly honor group requests made under the Framework by the U.S. competent authority for additional information about U.S. accounts identified as recalcitrant and reported on an aggregate basis by Japanese financial institutions.
The U.S. authorities would eliminate the obligation of each FFI in Japan to enter into a separate agreement with the IRS; identify specific categories of Japanese financial institutions or entities (including in particular certain Japanese pension funds) that would be treated as deemed compliance or exempt; and eliminate FATCA withholding on payments to financial institutons in Japan that have registered or entered into an FFI agreement and conduct due diligence and reporting in a manner consistent with FATCA. Financial institutions in Japan that comply with their obligations would not be required to terminate or impose passthru payment withholding on the account of a recalcitrant account holder.
Switzerland is supportive of negotiating a bilateral framework agreement to facilitate the implementation of FATCA, and the U.S. and Switzerland agree to work swiftly and constructively to negotiate an conclude a Cooperation Agreement. Under the Cooperation Agreement, Switzerland would direct all Swiss financial institutions not otherwise exempt or deemed compliant, to conclude an FFI Agreement with the IRS, and enable these Swiss institutions to comply with the obligations of the FATCA rules and FFI Agreement. Switzerland would accept and promptly honor a group request by the U.S. competent authority for additional information about U.S. accounts identified as recalcitrant and reported by Swiss financial institutions on an aggregate basis.
The United States would identify in the Cooperation Agreement specific categories of Swiss FFIs or schemes (in particular certain small, local FFIs and institutions/schemes in the field of the Swiss pension system) that would be treated as deemed compliant or exempt, and would eliminate U.S. withholding under FATCA on payments to Swiss financial institutions by identifying all Swiss financial institutions as participating FFIs or deemed-compliant FFIs, and agree to other appropriate measures to reduce burdens and simplify FATCA implementation. As a result of this Agreement, Swiss financial institutions would not be required to terminate or impose foreign passthru payment withholding on the account of a recalcitrant account holder.