EUROPOLITICS BRUSSELS—Denmark urged European Union member states to promptly resolve differences over proposals to revise the EU Savings Tax directive as a way to bridge differences with the U.S. Treasury Department over compliance with the Foreign Account Tax Compliance Act (FATCA).
As the current holder of the EU presidency, Denmark stated at a special meeting of EU member state officials that the United States has expressed a willingness to agree to a “government to government” solution on complying with FATCA, instead of having EU financial institutions provide the required information.
FATCA, which will enter into force on 1 January 2013 (certain implementing arrangements have nevertheless been postponed to 2014 and 2015), will impose full transparency obligations on European financial institutions with respect to deposits and assets held by all persons obliged to file returns with the US tax administration. Financial penalties will be imposed on banks that fail to play by the rules.
“It is urgent to work out a solution with the United States on the many problems the FATCA will cause for European financial institutions,” particularly in terms of administrative overload, writes Copenhagen.
The EU has already started negotiations with Washington. In this context, it is trying to convince the United States to be more flexible by playing on the “broad similarity” of aims between the FATCA and EU legislation on savings taxation – combating tax evasion – and ways of achieving them.
However, “the American authorities responded that the scope of the existing savings taxation directive is more limited than the FATCA’s scope,” writes Copenhagen. “So it is clear that early agreement on its extension would considerably help us obtain satisfying results in discussions with the United States.”
Stay tuned as the World works out its tax transparency issues!