A government-to-government approach to tackling tax evaders and implementing the US Foreign Account Tax Compliance Act (FATCA) has been agreed with the US authorities. According to EUROPOLITICS, five EU member states (France, Germany, the United Kingdom, Italy and Spain) worked out an arrangement with the US on its new reporting and withholding regime which is due to take effect in 2013.
Through a government-to-government approach to tax information exchange, the administrative burden, compliance costs and legal difficulties which EU financial institutions would otherwise face in applying the FATCA provisions should be greatly reduced according to the EU Commission. The financial industry estimates that the costs of ensuring compliance with FATCA as initially designed would have been significant, with some sources estimating the cost of the required adaptation as $100 million for each multinational bank.
Under FATCA, foreign financial institutions with US customers and foreign non-financial entities with substantial US owners must disclose information regarding US taxpayers directly to the IRS (Internal Revenue Service). Failure to disclose information will result in a requirement on non-US financial intermediaries to withhold a 30% tax on US-source income. Further information here.