WASHINGTON (Reuters) - Hong Kong has reached an information-sharing agreement with the United States under a new law meant to combat offshore tax dodging by Americans, the U.S. Treasury Department said on Friday.
Set to take effect on July 1, the Foreign Account Tax Compliance Act of 2010 (FATCA) will require foreign banks, investment funds and insurers to hand over information to the U.S. Internal Revenue Service about accounts with more than $50,000 held by Americans.
Foreign firms that do not comply face a 30 percent withholding tax on their U.S. investment income and could effectively be frozen out of U.S. capital markets.
The Hong Kong deal, known as an intergovernmental agreement, must be finalized by the end of the year. Details on the agreement were not immediately available.
The United States has negotiated more than 60 such deals to help financial institutions comply with FATCA and their local banking laws.
“With each agreement reached, we come closer to our goal of stopping tax evasion and narrowing the tax gap,” said Robert Stack, Treasury’s deputy assistant secretary for international tax affairs.
Reporting by Patrick Temple-West; Editing by Kevin Drawbaugh and Andre Grenon