PwC welcomes the Government’s announcement on FATCA

Thursday 25 October 2012

News Release

PwC welcomes the Government’s announcement
on FATCA regulations

Following on from today’s New Zealand Government announcement of its intentions to engage with the US Government on the Foreign Account Tax Compliant Act (FATCA) regulations, PwC confirms its support to ensure these possible new rules have a more controlled and minimal impact to the entire New Zealand financial services industry.

The 2010 introduction of FATCA by the US Government requires overseas financial institutions, including New Zealand banks, deposit takers, Kiwisaver schemes, managed funds and similar organisations to enter into an agreement with the US Internal Revenue Service (IRS), and provide details to the IRS about the affairs of certain customers with links to the United States.

If these rules are not followed, the financial institutions can have 30% of income and sales proceeds from US assets withheld by the US Government.

This simply means there is a significant cost to New Zealand organisations in managing their FATCA obligations, as well as the risk of having money withheld by the US Government and the potential that complying with the rules could breach New Zealand privacy and human rights laws.

The New Zealand Government today announced it proposes to enter into negotiations with the US Government on an "Inter-Governmental Agreement" (IGA) in relation to FATCA. If an IGA is agreed, New Zealand financial institutions will report on customers with US links to the Inland Revenue Department, which in turn will report to the US Government.

The potential for 30% of funds to be withheld is also removed, New Zealand has a greater opportunity to negotiate specific exemptions from the rules that fit with the local environment, and there is an ability to deal with domestic legal constraints.

PwC New Zealand FATCA Partner Mark Russell says, "We welcome the announcement by the New Zealand Government of its intention to pursue an Inter Governmental Agreement on FACTA. This approach will reduce the impact of the FATCA rules on New Zealand financial institutions and increases the potential for excluding Kiwisaver schemes from the cost of complying with FATCA.

“However, it will mean some local institutions that do not have US assets and planned on simply ignoring the FATCA rules are likely to have to comply with the new local information reporting rules.”

Overnight the IRS announced the key start date for FATCA is being delayed from July 2013 to January 2014.

Mr Russell adds, "The delay in the start date of FATCA will give the New Zealand Government more time to negotiate an agreement and implement the necessary domestic laws requiring collection of the US customer information. It also gives New Zealand financial institutions more time to make the necessary systems changes to collect and report the information required by FATCA.”
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