New Zealand has signed a Foreign Account Tax Compliance Act intergovernmental agreement with the United States, which will minimise compliance costs for financial institutions in New Zealand. The agreement includes a waiver for certain account types that are deemed to be low risk.
The IGA will facilitate information exchange under FATCA, which will take effect from July 1, 2014. It requires non-US financial institutions to provide certain information about their US customers to US authorities.
According to McClay, "under the IGA, rather than individually sending account information for US taxpayers to the US IRS, New Zealand financial institutions will instead provide this information to Inland Revenue, who will exchange it with the IRS."
McClay said that the agreement will make it easier for New Zealand financial institutions to comply with the requirements, and therefore reduce additional costs being passed on to New Zealand customers.
"The IGA is reciprocal, meaning that New Zealand will also receive information about certain accounts held by New Zealand residents with US financial institutions. This will help prevent tax evasion and enhance the integrity of both countries' tax systems," McClay said.
"This agreement is much the same as negotiated by a number of other nations including Denmark, Australia and the UK. The key difference is that we have managed to negotiate New Zealand-specific exemptions for entities and accounts that are considered low-risk from a US tax evasion and avoidance perspective. This includes Superannuation, KiwiSaver schemes, tax pooling accounts, registered charities, and Maori authorities as defined by tax legislation," he disclosed.