Russia Approves Direct Information Exchange on US Taxpayers
MOSCOW, June 25 (RIA Novosti) – Russia’s upper house of parliament, the Federation Council, on Wednesday authorized the direct exchange of information between Russian banks and US tax authorities on US taxpayers.
The US Foreign Account Tax Compliance Act (FATCA) requires foreign banks to supply the Internal Revenue Service (IRS) with information on the bank accounts of Americans. Under FATCA, signed into law in 2010, financial institutions worldwide are required to report details on the accounts and transactions of 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 a bank does not join FATCA, it can be sanctioned.
As under Russian law, banks are not allowed to disclose information to foreign government institutions, the US was previously in negotiations with Russia on signing an intergovernmental agreement that would simplify the process for all banks acceding to FATCA requirements.
However, the negotiations fell apart due to a rift in the countries’ relationship following the build up of the political crisis in Ukraine.
The Russian Ministry of Finance therefore tackled the problem unilaterally by amending Russian legislation.
Russian banks may now supply American taxpayer information to US tax bodies upon client consent, whereby the bank’s customers refusing to disclose the required details to the respective Russian bank can legally be denied service. Before submitting the FATCA-required information, Russian banks will have to report to the Central Bank of Russia and the relevant government agency on financial control.
