Ireland and Luxembourg support European Fatca deal

Ireland and Luxembourg have come out in support of a a joint statement released by HM Treasury on February 8 with the governments of the US, Germany, France, Spain and Italy.

The statement proposed a reporting arrangement which would remove the need for financial institutions to enter into direct agreements with the US’s Internal Revenue Service, as required under the Foreign Account Tax Compliance Act (Fatca).

The proposal will allow financial institutions to report instead to their local governments through existing tax arrangements, with information then passed automatically to the US as part of existing international tax reporting arrangements.

This will also drastically reduce the likelihood of a 30 per cent withholding tax which Fatca requires to be imposed on non-compliant firms, as all companies registered within the UK will automatically be considered Fatca compliant.

Irish Funds Industry Association (IFIA) chairman Ken Owens said a similar arrangement between Ireland and the US would support the country’s co-operation with the act. The Irish government has indicated that it plans to be a part of future inter-governmental negotiations.

Mr Owens said: “This is most welcome news and demonstrates a practical approach to European fund managers meeting their reporting obligations under Fatca. Ireland already has an information exchange agreement with the US and we are very fortunate to have the support of government which is doing all it can to support the ongoing growth in our industry by making any and all necessary amendments.”

Meanwhile, Luxembourg finance minister Luc Frieden flew to Washington this week to discuss Fatca with the US Treasury department. According to a statement released by the Luxembourg government yesterday (February 16), Mr Frieden “favours a co-ordinated approach at EU level” but said he would consider co-ordinating with the five governments already in discussions with the US.

Camille Thommes, director general of the Association of the Luxembourg Fund Industry, said the joint statement had introduced “some reliefs” but “in essence Fatca remains in place”.

“It is important to stress that these are high level discussions between countries,” he added. “The devil is in the detail and we must look at the details of the agreements. In my opinion it would be a bit ambitious to say Fatca is off the table.”

More than 5,000 investment funds are domiciled in Ireland, while there are 3,800 funds based in Luxembourg.

The European Fund and Asset Management Association earlier this week called for the US government to extend the negotiations beyond the five countries with which it is currently in discussions.