US taxpayers in Nepal come under IRS scrutiny
KATHMANDU: US taxpayers, including US citizens, firms and green card holders, living in or operating from Nepal will come under close scrutiny of the US taxman from now onwards.
Issuing a circular today, Nepal Rastra Bank directed all Nepali banks and financial institutions to provide bank account information of US
taxpayers living in or operating from Nepal to the Internal Revenue Service (IRS) of the United States.
The Nepali central bank issued the instruction following enactment of the Foreign Account Tax Compliance Act (FATCA) 2010 in the US, which requires non-US financial institutions to report about income of US taxpayers worldwide. This means all financial institutions in Nepal must send bank account information on US taxpayers to the US government.
“But before sending any information to the US, banks and financial institutions must take consent of accountholders,” says the circular.
The US had enacted FATCA after concluding that many US citizens living abroad were not filing tax returns and thus evading taxes.
FATCA requires foreign financial institutions to extend certain information on financial accounts held by US taxpayers or by foreign entities in which US taxpayers hold substantial ownership directly to the IRS of the US.
As per the law, all foreign financial institutions must sign an agreement with the US government and extend information on US accountholders to the IRS.
“But since Nepali banks and financial institutions have not entered into such agreements, they have to log on to www.irs.gov/fatca-registration and provide necessary information,” the circular says.
So far around 30 countries, including Canada, Singapore and many European nations, have signed the agreements on information disclosure with the US government. India’s Economic Times recently reported that the US Department of Treasury had indicated that India has reached an intergovernmental agreement with the US in substance beginning from April 11, 2014. “As a result, it is anticipated that a USA-India FATCA agreement will be signed soon.”
Foreign financial institutions that sign the agreement with the US government will be required to complete certain identification and due diligence procedures with respect to US accountholders and report annually to the IRS on its accountholders.
The agreement also obliges foreign financial institutions to withhold and pay the IRS 30 per cent of any payment of US source income made to non-participating foreign financial institutions; individual accountholders, who fail to provide sufficient information to determine whether they are US citizens; or foreign entity accountholders that fail to provide sufficient information about the identity of its substantial US owners, says the IRS website.
Recently, Credit Suisse of Switzerland had pleaded guilty for helping American citizens evade taxes and will soon be fined $2.5 billion. – See more at: http://www.thehimalayantimes.com/fullNews.php?headline=US+taxpayers+in+Nepal+come+under+IRS+scrutiny&NewsID=418241#sthash.TiTzfueq.dpuf
