The Internal Revenue Service (IRS) is working overtime to agree more than 70 different bilateral tax information exchange agreements ahead of a July deadline, legal sources tell PE Manager.
Once the agreements are finalized, the US plans to hold a “simultaneous signing session” in the coming months, according to an offshore tax lawyer familiar with the matter.
The IRS was not immediately available to comment.
The source added the UK may be partially responsible for a delay in the signing ceremony. UK tax authority HMRC is demanding its nearby offshore domiciles enter into a FATCA-like arrangement with it first before finalizing any agreement with the US, the source said.
The US originally planned to have the bilateral agreements completed by January, but that deadline was pushed back to July as a result of an “overwhelming interest” from foreign countries wishing to participate, according to a government statement.
The agreements come as part of the Foreign Account Tax Compliance Act (FATCA), which requires US citizens with foreign financial accounts to report their holdings to the IRS, or have a foreign government relay the information on their behalf. Those that fail to comply suffer a 30 percent withholding tax on payments travelling out of the US.
So far nine countries have signed FATCA deals with the US: the UK, Denmark, Ireland, Mexico, Norway, Spain, Germany, Switzerland and Japan. Earlier this week the US completed a tenth agreement with the Cayman Islands, but a formal signing is not expected until later this year.
Under the Cayman agreement, the offshore financial center will share tax information on local US account holders with the IRS, and the US will do likewise for Cayman citizens with US financial accounts.