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Dechert Hong Kong warns of compliance issues for Asian firms as FATCA deadline approaches

Tuesday, June 26, 2012

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Karl J. Paulson Egbert
Beverly Chandler, Opalesque London: Reporting from Dechert in Hong Kong, Karl J. Paulson Egbert finds that earlier hopes that the financial services industry in Asia could begin to make sense of FATCA’s obligations when the U.S. Department of the Treasury ("Treasury") and Internal Revenue Service ("IRS") issued proposed regulations relating to the Foreign Account Tax Compliance Act ("FATCA") earlier this year have been dashed, with the FATCA legislation still offering a compliance challenge.

Paulson Egbert writes of comment letters from Asian trade groups from a variety of Asian jurisdictions, including Hong Kong, Singapore, Japan and Australia which reflected the unique obstacles each faced with FATCA compliance, but beyond that, a general unease with FATCA’s scope, as well as skepticism that FATCA’s rewards (an estimated US$1 billion in additional tax revenue annually) justified its expenses.

Paulson Egbert writes: " Generally, FATCA attempts to combat U.S. tax evasion by requiring that non-U.S. financial institutions report the identities of U.S. shareholders or clients — or face a 30% withholding tax on their U.S. source income. But comment letters from higher tax jurisdictions in Asia questioned whether U.S. tax evaders would cheat on their U.S. taxes only to pay local taxes elsewhere".

In addition, comment letters from bot......................

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