New Zealand banks are moving to implement their obligations under the United States Foreign Account Tax Compliance Act (FATCA).
The US law aims to reduce tax evasion by US persons using financial accounts outside the United States of America. It does so by requiring participating financial institutions around the world, including New Zealand banks, to provide relevant information about customers who are US persons.
“FATCA does not introduce any new tax obligations for US citizens and residents living in New Zealand. They will still have to file an annual US tax return,” said New Zealand Bankers’ Association deputy chief executive Karen Scott-Howman.
FATCA will be phased in from 1 July 2014. The information reporting requirements will apply to relatively few people living in New Zealand. They include US citizens, US permanent residents and green card holders, and people born outside the United States who have a US parent.
“Anyone unsure about their US tax status should seek independent tax or legal advice,” Scott-Howman said.
If financial institutions do not comply with FATCA they may be penalised by a 30% withholding tax on principle and income from investments in the United States. US capital markets provide much of the funding most banks need to lend to New Zealand households and businesses. If those funding sources were no longer available due to non-compliance there would be a significant impact on the New Zealand economy.
“Complying with FATCA allows our banks to continue to provide services to US citizens and residents who have New Zealand bank accounts,” said Scott-Howman.