Revenue Minister Todd McClay and United States Chargé d’Affaires a.i., Marie Damour, today signed an intergovernmental-agreement (IGA) which will minimise compliance costs to financial institutions in New Zealand while assist in the prevention of tax evasion.
The IGA is in response to the Foreign Account Tax Compliance Act (FATCA) information-reporting regime enacted by the United States which will take effect from 1 July 2014. It requires non-US financial institutions to provide certain information about their US customers to the United States.
US tax payers have a worldwide tax responsibility to the US government.
“Under the IGA, rather than individually sending account information for US taxpayers to the US IRS, New Zealand financial institutions will instead provide this information to Inland Revenue, who will exchange it with the IRS,” Mr McClay says.
Mr McClay says that the agreement will make it easier for New Zealand financial institutions to comply and thereby reduce additional costs being passed on to New Zealand customers.
“The IGA is reciprocal, meaning that New Zealand will also receive information about certain accounts held by New Zealand residents with US financial institutions. This will help prevent tax evasion and enhance the integrity of both countries’ tax systems.”
“This agreement is much the same as negotiated by a number of other nations including Denmark, Australia and the UK. The key difference is that we have managed to negotiate New Zealand-specific exemptions for entities and accounts that are considered low-risk from a US tax evasion and avoidance perspective. This includes Superannuation, KiwiSaver schemes, tax pooling accounts, registered charities, and Maori authorities as defined by tax legislation.”
“It is not imposing extra taxes or changing taxing rights. It is also not about Inland Revenue collecting taxes on behalf of the US government.”
“The IGA simply makes it easier for our financial institutions to comply with US law, while also helping stamp out tax evasion,” Mr McClay says.
The text of the agreement and a related memorandum of understanding are available at www.taxpolicy.ird.govt.nz.