Russia was in agreement with the United States to sign an amended intergovernmental agreement (IGA). They signed the agreement just days before FATCA came into force. Interestingly, the expected reciprocity between the two countries did not occur. Russian banks and financial institutions are required to report to the United States all U.S. accounts with a value equal to or greater than $10,000, but the U.S. does not have the same obligation to report Russian bank accounts in U.S. banks to the Russian government. China, another country that has firmly refused to sign the agreement with the United States, has now committed. China`s IGA with the United States, however, is reciprocal. This means that Chinese financial institutions will report all U.S.
accounts to the IRS, and U.S. banks will report all Chinese accounts to the Chinese government. This allows both countries to stem the dominant problem of tax evasion. It should be noted that the United States and China are on a short list of countries that collect taxes around the world. In addition to the obligation to protect the country`s banks from IRS sanctions, China would also benefit from the IGA under new legislation introduced in January 2014, the Foreign Asset Reporting Requirements (FARR). The FARR requires residents of the People`s Republic of China (PRC) to report all transactions, overseas accounts and international assets in order to prevent externalization. Prior to this legislation, residents were only required to report international transactions with non-residents. Non-compliance results in penalties of nearly US$50,000 for businesses and US$8,000 for individuals. In addition to residents of the PRC, the new reporting obligations for foreign assets also apply to the following groups: citizens of the PRC who have not been in the country for less than one year. Non-residents who have had economic transactions in the PRC. Companies registered in the PRC offices of foreign institutions Persons residing in the PRC for more than a year You often delegate the primary responsibility for monitoring compliance with legal rules to an FRO with competence in the matter. This may be desirable for risk reduction, efficiency and cost control, especially where directors do not personally have the interest, capacity or expertise to monitor the work of the administrator and approve or prepare FATCA-related reports and forward them to the competent tax authority.
The FRO of an investment company that has entered into an FFI agreement with the IRS still has these responsibilities. China has essentially accepted a Model 1 Intergovernmental Agreement (IGA) with the United States regarding fatca. This IGA means that Chinese financial institutions must annually inform the competent Chinese authority of the accounts to be declared in order to exchange tax information with the IRS every year in September. Eighty-seven other countries have also either signed a Model 1 IGA or mostly approved. . . .