WASHINGTON (Reuters) - Singapore has reached a tax information-sharing agreement with the United States under a new law meant to combat offshore tax dodging by Americans, a U.S. Treasury Department spokeswoman said on Monday.
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 about Americans’ accounts that have more than $50,000 to the U.S. Internal Revenue Service.
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 Singapore deal, known as an intergovernmental agreement, was expected for more than a year and is significant because it broadens FATCA’s dragnet to a major Asian financial center, sources have said.
Like most of the other FATCA deals, the Singapore agreement will allow Singapore firms to report U.S. account-holder information to their local tax authority, which will send it along to the IRS. The Singapore deal was agreed “in substance” and must be finalized by the end of the year.
Financial firms in countries that have not reached a FATCA pact must report directly to the IRS and risk violating local privacy laws.
More than 60 IGAs have been negotiated to date, including deals with Indonesia, Peru and Kuwait announced in recent days, according to the Treasury Department’s website.
FATCA was enacted after a scandal involving Americans hiding money in Swiss bank accounts.
Reporting By Patrick Temple-West. Editing by Andre Grenon