We’ve written before about the Foreign Account Tax Compliance Act (FATCA) and what it means for taxpayers with offshore or foreign accounts and assets. The main objective of FATCA is to enable information sharing between foreign financial institutions and the US government, with an aim toward catching tax evaders. The US and foreign financial institutions enter into agreements under which information on US depositors is shared with the Department of the Treasury. A statute in the Act provides that if a foreign financial institution does not enter into such an agreement, then US financial institutions will be required to withhold a 30% tax on all distributions to those financial institutions made by US depositors. To date, several countries have entered into FATCA agreements with the US and many more are in the process of negotiation. One such country is Russia.
The particular issue facing Russia is this. Up through the end of March, negotiations between the US Treasury Department and the Russian government were ongoing. But when Russian forces moved into Crimea, the US withdrew from negotiations. If no agreement is reached by July 1 of this year, or if the deadline is not otherwise extended, the 30% withholding will go into effect on all payments made from US financial institutions to their Russian counterparts, something sure to hurt Russia in the world market.
Horowitz Law Offices represents clients in various tax matters including undisclosed offshore bank and other financial accounts. You are welcome to contact us at 312 787 5533 or email@example.com