The prospective ratification of the Foreign Account Tax Compliance Act (Fatca) by the Senate should prove sufficient to suspend particular bank-secrecy provisions and compel local lenders to share account holder information with US tax authorities.
But lawyer Charadine Bandon, International Tax Affairs Division (ITAD) chief at the Bureau of Internal Revenue (BIR), said Fatca needs to be ratified first by the Senate to have it enforced and take effect of the law.
“Getting the treaty status will be sufficient to drop the bank-secrecy provision. With that, banks may now share information on account holders with the BIR and the BIR, in return, using the intergovernmental agreement [IGA] and the existing agreement with the bank, can legally transmit the information to the US Internal Revenue Service [IRS],” a senior BIR official said.
Serafin Salvador Jr., managing partner at Salvador Llanillo Bernardo (SLB) law office, said if Fatca is ratified by the Senate, it will automatically amend the bank-secrecy law.
“If it’s ratified, the bank-secrecy law will effectively modified. That’s the position of the BIR. So far, what they are concerned of is that it must be ratified first. It’s necessary, even before they can give information to the US government,” he said on the sidelines of the 2015 Tax and Asia Conference on Friday.
“The BIR is also saying that Fatca will be beneficial to the Philippine government because it can get information from the US on the deposits of Filipinos in US banks and, perhaps, it’s a good source of tax collection for the BIR,” he told the BusinessMirror.
The reciprocal nature of the IGA provides for the equivalent benefit to the Philippines as the IRS will also routinely provide the BIR reports on financial accounts maintained by Philippine residents in US financial institutions.
Finance Secretary Cesar V. Purisima earlier said the IGA eases the compliance burden of Philippine financial institutions who risk facing a 30-percent withholding tax on certain US-sourced income if they fail to comply with
Fatca-related reporting requirements.
The automatic reporting of financial accounts is premised on the appropriate safeguard measures to ensure confidentially of information that will be used solely for tax purposes, and the necessary infrastructure to effect timely, accurate and secure exchange.
Once in place, these will trigger the automatic exchange.
Enacted by the US in 2010 to combat offshore tax evasion by encouraging transparency and obtaining information on accounts held by US taxpayers in other countries, Fatca is rapidly becoming the global standard in the effort to curtail offshore
tax evasion.