FSC moves to reduce FATCA compliance burdens for financial institutions

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The FSC pushes towards setting up rules for implementing the US-Korea Automatic Tax Information Exchange Agreement. The U.S. enacted the Foreign Account Tax Compliance Act (FATCA) to crack down US taxpayers’ tax evasion. Under the FATCA, financial institutions outside the U.S. are required to sign an agreement with the U.S. Internal Revenue Service(IRS) by the end of June this year to provide information about financial accounts held by U.S. taxpayers.

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Governments around the world are pursuing inter-governmental agreements with the U.S. in order to reduce compliance burdens for financial institutions.  As of March 2014, 26 countries including the U.K., Japan and Canada signed the agreements. Korea also struck a deal with the U.S. on March 17 this year, the so-called US-Korea Automatic Tax Information Exchange Agreement, under which financial institutions are required to report information about financial accounts to their home country’s tax authorities; and then the Korean National Tax Service(NTS) and the U.S. IRS  will exchange such information every year starting from September 2015.

The FSC’s move is to set up details to implement the US-Korea Automatic Tax Information Exchange Agreement in order to provide financial institutions with clear guidelines and to relieve their compliance burdens.  The implementation rules will be posted at the FSC website as a prior notice from April 30 to June 9.  The FSC plans to finalize and enforce the rules within the first half of this year.

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