Fatca Implementation
Banks, NBFIs spurred to sign deal with US IRS by July 1 to avoid penalty
The country’s scheduled banks and non-bank financial institutions will have to sign agreements with the United States’ Internal Revenue Service by July 1 this year to avoid giving 30 per cent withholding tax on their income in US, said senior bankers and experts at a workshop on Tuesday. The banks and the NBFIs will sign participant agreements with the IRS under the Foreign Account Tax Compliance Act of US as the act requires all foreign financial institutions to report the IRS information on their US accountholders including those of green card holders.
If the government signs an inter-government agreement with US by July this year, they (banks and NBFIs) will not require signing deals with the IRS, they said.
Citibank NA Bangladesh organised the day-long workshop on the FATCA for representatives of the banking sector at Ruposhi Bangla Hotel in the capital.
Government officials, senior bankers and US officials addressed the programme.
US will deduct the tax from 2017 from the income of the banks and the NBFIs which would not sign deals with the IRS.
Resident legal adviser to the embassy of USA, Dhaka Karyn Kenny said that the US government would treat the information collected under the FATCA confidential and would disclose it only to those connected with US federal tax assessment and collection.
‘The foreign financial institutions that do not both register and agree to report would face a 30-per cent withholding tax on certain US-source payment to them,’ she said.
She said 18 countries had already signed the inter-government agreements with US on the FATCA implementation.
The participant agreement signing between the FFIs and the IRS is to prevent the automatic 30 per cent withholding on financial institutions’ US source income, she said.
BB deputy governor SK Sur Chowdhury said that the FATCA enacted in 2010 in US requires a FFI to report to the IRS of US.
The BB has already issued a circular to all banks, suggesting them to take necessary measures to sign with the IRS for the FATCA implementation in a bid to avoid the tax.
Banks need to arrange workshop for their staff to educate them about the FATCA, he said.
National Board of Revenue income tax policy member Md Aminul Karim said that the country respects foreign act and regulation.
He also highlighted that the existing double taxation agreement with USA needs to be reexamined further and a broad agreement between the two governments needs to be reached prior to implementation of the FATCA.
Pubali Bank managing director Helal Ahmed Chowdhury said that Association of Bankers, Bangladesh had taken the FATCA issue seriously.
The BB on Tuesday allowed the NBFIs to sign agreements with the IRS if
they (NBFIs) hold US taxpayers’ bank accounts.
A BB circular issued on the day said according to the FATCA, the financial institutions across the globe have to report to the US IRS about accounts held by US taxpayers or by foreign entities in which US taxpayers hold a substantial ownership interest.
The central bank earlier issued another circular to all banks allowing them to sign deals with the IRS on FATCA implementation.
-With New Age input
