MANILA, Philippines – A notable 214 Philippine banks and financial institutions have registered under the Foreign Account Tax Compliance Act (FATCA), a US law that requires non-US entities to identify American accounts holding over $50,000, the Bangko Sentral ng Pilipinas reported.
Enacted in 2010, the FATCA mandates banking and financial institutions that conduct business with US individuals and entities to report the name and address as well as the largest account balance in the year and total debits and credits of any account owned by a US resident.
This measure is designed to help US authorities track resident individuals and companies hiding income and assets in foreign jurisdictions. It is also aimed at curbing offshore tax evasion by American citizens.
According to the BSP, 51 of the 214 domestic financial institutions that registered under FATCA as of the end December last year comprised of banks.
Failure to comply with FATCA’s requirements will expose such financial institutions to a hefty 30-percent withholding tax on all US-sourced revenues including dividend, interest, fees and sales as well as the investments of their customers.
The BSP said the Philippines signed on Nov. 30, 2014 an intergovernmental agreement (IGA) with the US Internal Revenue Service (IRS), making it easier for the country to comply with the provisions of FATCA.
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“The status of the Philippines as a jurisdiction treated to have an IGA in effect provides welcome relief on some FATCA-related operational issues confronting Philippine financial institutions,” the central bank noted.
“With an IGA in effect, all financial institutions in the Philippines will be considered FATCA compliant and will not be subject to withholding on certain US-sourced income payments provided that they register at the FATCA portal and must observe together with our government the terms of the IGA,” the BSP said.
The agreement improves existing reciprocal tax information-sharing arrangements between the US and the Philippines.
Certain reservations have been expressed by industry participants about some FATCA provisions, which they fear could violate the Philippines’ bank secrecy law and signal the undue interference by US tax authorities in the country’s banking system.
The BSP had previously advised foreign financial institutions in the country to study the potential impact of FATA on their operations as well to form policy measures that would enable their operating systems to comply with the US tax law’s procedures in detecting tax abuses by American taxpayers with income or assets in the Philippines.
As of Dec. 31 last year, the number of countries that have formally signed an IGA with the US reached 52.
