Tax-Expatriation

HUGE NEWS – China has “Reached an Agreement in Substance” for a FATCA Intergovernmental Agreement (IGA) – its Affect on USCs and LPRs Living in China and Hong Kong

Posted on June 28, 2014 Updated on June 28, 2014

HUGE NEWS – China has “Reached an Agreement in Substance”  for a FATCA Intergovernmental Agreement (IGA) – its Affect on USCs and LPRs Living in China and Hong Kong

On the absolute eve of the crucial July 1, 2014 FATCA deadline, China has apparently “reached [an] agreement in substance” -i.e., an IGA with the U.S. Treasury Department. 

This has enormous implications, in my view, considering the amount of trade between the two countries and the number of U.S. citizens and LPRs residing in China (not to mention the number of US. companies doing business in China).

There had been much doubt whether China would sign an IGA.  See, for instance, China’s Relationship with the Contentious U.S. FATCA. – In my view, had China not agreed to a FATCA IGA, enormous repercussions around the world would have followed – particularly regarding how FATCA would not have been able to be rolled out throughout the major economic countries.

China now joins the other IGA countries “deemed to have been entered into” by a total of some 80+/- countries.  See, those countries-jurisdictions that have signed agreements and those who have reached agreements in substance and have  consented to being included on [the Treasury] list.

China is now included as of 26 June 2014.  Hong Kong had previously entered into a Model 2 IGA in 9 May 2014.

What does this mean for USCs and LPRs living in China and Hong Kong?  In short, Chinese and Hong Kong financial institutions (FFIs) and non-financial foreign entities (NFFEs) will need to identify the accounts of USCs and LPRs pursuant to the FATCA rules set forth in the IGA.  The reporting extends beyond individuals to companies and trusts which have so-called “substantial U.S. owners”.

Presumably, China will be issuing some type of implementing regulations to provide the details of how these Chinese FFIs and NFFEs will go about collecting this information.  See, The Catch 22 of Opening a Bank Account in Your Own Country – for USCs and LPRs, for an overview of how these institutions will be requiring specific information of USC and LPR individuals in their home countries.