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Singapore, US finalise agreement on tax evasion
[SINGAPORE] Singapore said on Tuesday that it has finalised an information-sharing agreement with the United States that is aimed at combating offshore tax dodging.
The deal will make it much easier for financial institutions in one of Asia's biggest wealth management centres to comply with US tax law.
The pact was agreed in principle in May, but had to be finalised before the end of 2014 so that firms could take advantage of it come January when they have to start abiding by the Foreign Account Tax Compliance Act of 2010 (FATCA).
Under FATCA, foreign banks, investment funds and insurers have to hand over information to the US Internal Revenue Service (IRS) about accounts with more than US$50,000 held by Americans.
Foreign firms that do not comply face a 30 per cent withholding tax on their US investment income and could effectively be frozen out of US capital markets.
Tuesday's agreement means that firms in Singapore can report US account holder information to the local tax authority, which will send it to the IRS, saving them from dealing directly with US tax authorities.