Monday, January 5, 2015

FATCA

Fatca is an american anti tax evasion act. It makes it mandatory for foreign financial institutions to provide information about clients who could be subject to American tax laws, and failure will do so will result in a 30% withholding tax in all payments from the US.
This required registering with the US's Internal Revenue Service through a web based platform. Since Indian companies too have substantial dealing with the US, despite the absence of an Intergovernmental agreement, they have been asked to comply.
Earlier, tax information was shared on "request", which was both slow and easy for tax evasion.
Problems with FATCA:
1. The extra territoriality of FATCA has been subject to criticism.
2. It imposes additional costs it imposes on companies which require segregating of american and non american accounts, along with other compliance standards like payment details etc.
Advantage of FATCA:
It may bring in a new global standard and increased emphasis on tax evasion.
This is already been done as FATCA may be subsumed in another scheme by OECD which is supported by India. Such global standards may lower costs for tax compliance for companies.
Thus, countering tax evasion is a global concern but mutually agreed set of standards are required which do not place additional burden of institutions.

No comments:

LinkWithin

Related Posts Plugin for WordPress, Blogger...