MOSCOW, April 18 (RIA Novosti, Prime) – Russian Ministry of Finance has devised a way for the banks to comply with the US Foreign Account Tax Compliance Act (FATCA) without closing the accounts of their customers, Kommersant newspaper said Friday.
Although the Ministry still has not given banks joining the FATCA the right to withhold 30 percent tax on the income of their US clients independently, the draft law still provides the opportunity to do so without violating the laws of either country.
The assumption is that Russian banks will be able to transmit information about customers directly, not only to the US Internal Revenue Service (IRS), but to any company authorized to levy taxes.
Under FATCA, signed into law in 2010, financial institutions worldwide will be required to report details of accounts and transactions of their US taxpayer clients to the IRS and act as fiscal agents for the US, with the right to charge a 30 percent tax on their passive income related to the United States. If the bank does not join FATCA, it may be sanctioned. But the US has recently abandoned the negotiations on signing intergovernmental agreement with Russia, which would have potentially simplified the process for all banks acceding to FATCA.
Russian Ministry of Finance is therefore tackling the problem unilaterally by amending the legislation of the Russian Federation. But there isn’t much time left to do it: banks must register with the IRS before May 5, otherwise they risk being sanctioned starting July 1.