The Investment Management Association has warned that other jurisdictions are likely to follow the US in introducing their own version of the foreign account tax compliance act.
Fatca will be introduced in January 2013 and will impose new onerous reporting requirements on UK financial institutions to provide the US Internal Revenue Service with information on any US taxpayers they deal with. Penalty for non-compliance is a 30 per cent withholding tax, imposed on a pro-rata basis and levied on the gross proceeds of any US assets. KPMG estimates that Fatca could cost fund firms up to £45 per investor.
IMA head of taxation Steve Lynam warns other countries are likely to follow America’s lead and introduce their own versions of Fatca. He says this would add further significant costs to the industry as they are likely to deviate from the US Fatca and require special system changes for each country’s legislation.
He says: “It is very likely Fatca will set a new international bar where other countries start to put similar laws in place. We are not going to end up in a world with just one Fatca.”