MANILA, Philippines - Local banks with US-citizen clients who are non-compliant with US tax rules may face sanctions as they expose themselves to legal and financial risks, the Bangko Sentral ng Pilipinas said.
“The BSP will study what sanctions, if any, we will impose if a local bank decides it wishes to handle US persons but exposes itself to financial and legal risks by not complying with FATCA (Foreign Account Tax Compliance Act),†central bank Governor Amando M. Tetangco Jr. said.
The FATCA, set to be implemented starting July 1, mandates various registration and reporting measures to allow the Internal Revenue Service (IRS) to collect information on US citizens living outside their homeland.
The regulation states that foreign financial institutions (FFI) should submit reports on their US-citizen clients’ account balances, gross proceeds, and dividends.
“The BIR (Bureau of Internal Revenue) has recommended and the DOF has agreed that the Philippines would adopt Model1 Intergovernmental Agreement,†Tetangco said.
“Under the Model 1 IGA, FFIs will provide information to the FATCA partner – in the case of the Philippines, possibly the BIR – who will in turn be the one to provide information to the IRS,†he continued.
The BSP chief explained that as early as last year, the central bank advised local banks to assess whether they should comply with the FATCA or not.
“In a memorandum to banks in July 2013, we advised the banks that they are to individually evaluate if they are covered by FATCA, the potential implications on their respective businesses, if any, and prepare their operating businesses as appropriate,†Tetangco said.
“In essence, FATCA compliance is basically a bank’s business decision,†he added.