In a circular sent to financial institutions, the SFC outlined what the US Government and, more specifically, its tax office, the Internal Revenue Service, would expect from foreign financial institutions (FFIs).
It warned that the Foreign Account Tax Compliance Act is principally concerned with “the imposition of reporting requirements for FFIs in respect of foreign financial accounts held by US taxpayers or by foreign entities in which US taxpayers hold a substantial ownership interest”.
However, the SFC also revealed the Hong Kong Government has been in discussions with the US Treasury Department “with the objective of concluding an inter-governmental agreement (IGA) designed to facilitate compliance with FATCA by FFIs in Hong Kong in a manner that reduces their overall reporting burden”.
The IGA would be similar to that already negotiated between the US and Singapore, Germany, Spain, Norway, Switzerland, Ireland, Mexico, Denmark and the UK. (Click here for an explanation of the IGA from international law firm Withers)
In July the US announced a six month extension for non-US financial institutions to comply with FATCA as it looked to conclude discussions with a wave of countries now seeking to establish IGAs in a bid to mitigate some of the more costly aspects of the new law.
