Asian bankers wary of new US rules on foreign accts
MANILA, Philippines - Members of the Asian Bankers Association (ABA), which include the Philippines, have expressed concern on the possible negative impact of the Foreign Account Tax Compliance Act (FATCA) on their operations.
In a position paper presented during the recently concluded ABA Conference in Mongolia attended by over 200 bankers from around and outside the Asia Pacific region, the ABA, chaired by Rizal Commercial Banking Corp. president Lorenzo Tan, has called on its member-banks to start a dialogue with their respective governments as soon as possible to discuss this matter.
ABA said there is a need to come up with the best approaches to mitigate the adverse impact on their operations of the FATCA implementation.
According to the ABA paper, FATCA and the proposed regulations that are being considered by the US Treasury Department to implement it are raising deep concerns among financial institutions throughout the world, especially to Asian banks.
“Identifying some of the negative implications of FATCA on banks and financial institutions, the paper called on ABA member-banks to start its dialogue with their respective governments as soon as possible on the best approaches for mitigating the adverse impact on their operations,†it said.
The paper focused on the implications for Asian banks of the FATCA which require foreign financial institutions to report to the US Internal Revenue Service accounts held by US nationals in exchange for exemption from a 30 percent tax on US-sourced income.
In July this year, the Bangko Sentral ng Pilipinas issued a memorandum circular urging all financial institutions to prepare for the effectivity of the US order next year targeted at running after American tax evaders offshore.
In its circular, BSP said its supervised institutions – including commercial and investment banks – must “evaluate†if they are covered by FATCA and if applicable, must “establish a policy†to comply.
“They are advised to study the potential effects of FATCA to their businesses and determine the necessary steps to take to avoid the unfavorable consequences of non-compliance with FATCA requirements,†the BSP said.
FATCA is part of the Hiring Incentives to Restore Employment Act enacted into law in 2010 as part of stimulus measures to boost US economic activity and employment.
According to the US Internal Revenue Service (IRS), firms may register between this month until Oct. 25 through its online portal to become “FATCA-compliant.†In doing so, they are agreeing to provide “certain information†to the IRS concerning US accounts they hold.
In addition, US citizens who have foreign assets in excess of $50,000 must report their holdings to the IRS.
If they chose not to register though, FATCA orders individuals or entities engaging in business with the non-compliant company to withheld 30-percent tax from US-sourced payments.
BSP Deputy Governor Nestor Espenilla Jr. earlier said the law’s “significant impact†may be felt by local commercial banks, especially since they are the ones which have transactions with US nationals.
Filipinos who are naturalized US citizens holding bank accounts locally and abroad will also be affected, he added.
In the same memo, the BSP told the financial entities to “carefully consider†the implications of FATCA to local and foreign deposit secrecy laws, which prohibit the giving out of any bank account information to anyone.
“It’s not a matter of commitment...Our tone is a reminder. Any bank has an option,†Espenilla said.
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