Hong Kong and the United States are nearing a conclusion to negotiations for an inter-governmental agreement (IGA) to pave the way for Hong Kong financial institutions to comply with the Foreign Account Tax Compliance Act (FATCA).
The FATCA is due to come into effect on July 1, 2014 and will ensure that the US Internal Revenue Service (IRS) receives data in respect of accounts held with foreign financial institutions (FFIs) by US persons. If an FFI does not disclose details on US clients this could lead to a 30 percent withholding tax being charged on payments of US-sourced income.
In many cases the implementation of FATCA requires adjustments to foreign laws to ensure that financial institutions in a particular country can comply with the requirements of the US law. The IGA is designed to facilitate the compliance by FFIs with the FATCA requirements.
