Mr Michael Noonan T.D, Minister for Finance and Chargé d’affaires at the U.S. Embassy in Ireland, John Hennessey-Niland, signed in Dublin today, 21 December 2012, an
Agreement to Improve International Tax Compliance and to Implement the FATCA (Foreign Account Tax Compliance Act).
Commenting on the signing, Minister for Finance Noonan said:
"Ireland is one of the first countries in the world to sign such an Agreement with the United States and we welcome the opportunity to demonstrate Ireland’s commitment to helping combat international tax evasion."
He added that "This Agreement will have a positive impact on trade and investment between Ireland and the United States, and will provide certainty and clarity to Irish and American Financial Institutions who wish to do business with each other.We value the long-standing friendship between Ireland and the United States of America and the close economic links that exist between our two nations."
The Agreement will significantly increase the amount of tax information automatically exchanged between Ireland and the United States and it sets a new standard in international tax transparency aimed at tackling tax evasion.
This Agreement provides for the automatic reporting and exchange of information in relation to accounts held in Irish financial institutions by U.S. persons, and the reciprocal exchange of information regarding U.S. financial accounts held by Irish residents.
The main purpose of the Agreement is to combat international tax evasion, by preventing individuals from hiding money outside of either State in order to avoid paying tax.
The early conclusion and publication of the Agreement will also provide certainty and clarity to Irish financial institutions and assist them in preparing to meet their compliance obligations under the FATCA.
The conclusion of this Intergovernmental Agreement was one of the issues discussed at the meeting between the Tánaiste and Minister for Foreign Affairs and Trade, Eamon Gilmore, T.D., and Secretary of State for the United States, Hillary Clinton, during Secretary Clinton’s visit to Dublin on December 6, 2012.
Chargé d’affaires John Hennessey-Niland said, "The Secretaryand the U.S. are appreciative of the Irish Government’s support for FATCA which will be an important instrument in building further economic activity between Ireland and the U.S."
The text of the Agreement can be viewed on the Department of Finance Tax Policy website at
www.taxpolicy.gov.ie
Background
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‘FATCA’ refers to the Foreign Account Transaction Compliance Act, which is a piece of U.S. legislation.
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The FATCA legislation effectively requires all Financial Institutions outside the U.S., who carry on business in or with U.S. Financial Institutions, to report to the U.S. tax authorities (IRS) in respect of financial accounts held with them by U.S. persons.
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Direct reporting by foreign financial institutions to the IRS would result in a significant administrative burden for such companies and may also result in data protection issues. As a result, a number of countries have decided to enter bilateral agreements with U.S. to enable the exchange of such information.
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Ireland is one of the first countries to conclude such an agreement. The agreement provides that Irish financial institutions will report to the Irish Revenue Commissioners in respect of U.S. account-holders and, in exchange, U.S. financial institutions will be required to report to the U.S. Internal Revenue Service in respect of any Irish-resident account-holders.
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The two tax authorities will then automatically exchange this information on an annual basis.
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While the Ireland-U.S. tax treaty already provides for the exchange of information for tax purposes, this new Intergovernmental Agreement goes a step further by providing for the automatic exchange of more detailed information on an annual basis