As reported in previous editions of Tax Tips, the Government is negotiating an intergovernmental agreement (IGA) with the United States in relation to the Foreign Account Tax Compliance Act (FATCA) – refer Tax Tips November 2012 and Tax Tips March 2013. FATCA is US legislation requiring non-US financial institutions such as banks, life insurers or managed funds to provide the US Internal Revenue Service (IRS) and the US Treasury with information on their dealings with US clients. FATCA is due to come into force on 1 January 2014.
Last week, the New Zealand Government issued a short press release stating that it would endeavour to minimise FATCA compliance costs. However, the Revenue Minister has not yet provided any details on how this will be achieved.
The IGA should reduce compliance costs in the long term because it means New Zealand financial services companies will be dealing with and reporting to Inland Revenue rather than the IRS. The IGA will also benefit a fairly limited group of small New Zealand financial services companies if Inland Revenue can successfully negotiate specific exemptions from FATCA for them.
We do not expect the upfront compliance requirements and associated upfront costs to change dramatically from those in a non-IGA environment.
Visit our dedicated FATCA website for further information.