Applying FATCA in APAC

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Anthony Leone and Michael Chan BNY Mellon, US and Singapore

Anthony Leone works in Global Transaction Services at BNY Mellon in Pittsburgh and Michael Chan works in Asset Servicing at BNY Mellon in Singapore.

As FATCA is approaching, financial institutions and countries around the world are focusing on how to comply. This article takes a closer look at the APAC region and provides an overview of the current status so far in some key APAC countries. There is also a very useful FATCA timeline, which provides a quick reference for key dates to adhere to going forward to ensure compliance.

I. Introduction

The US government enacted the Foreign Account Tax Compliance Act (“FATCA”) to prevent the use of offshore financial accounts as a conduit for tax evasion.1 While at first glance it may seem that the breadth of a law derived in the US would not have jurisdictional force outside of the country's borders, FATCA has in fact extended to all regions of the world, including the Asia Pacific (”APAC”) market.2

To that end, a new 30 percent US withholding tax on specified payments of US source income made to foreign financial institutions (“FFIs”) that fail to meet certain compliance requirements associated with FATCA goes into effect beginning July 1, 2014. The US government has already signed agreements with 12 FATCA partner countries, reached 16 agreements in substance that are pending finalisation, and initiated negotiations with over 50 countries.3

II. FATCA compliance

Pursuant to FATCA, withholding agents will generally be required to withhold on payments made to an FFI, unless the payments can be reliably associated with documentation that demonstrates the FFI's compliance with the legislation. In such cases, those entities that demonstrate FATCA compliance will be exempt from the legislation's withholding.4

Outside of the US, FATCA compliance may generally be achieved through either an Intergovernmental Agreement (“IGA”) or an FFI agreement. IGAs are agreements between the US government and a FATCA partner country and generally apply to all FFIs in a particular country. Conversely, FFI agreements are for individual FFIs domiciled in countries that have not signed an IGA.5

At the end of the day, each country may or may not choose to sign an IGA with the US. Depending on a country's position, the financial institutions domiciled in each particular market will need to either follow the IGA or the general FATCA provisions via an FFI agreement in order to avoid FATCA withholding.6 The following is a description of the current status of FATCA negotiations within the APAC region.

A. Japan

Japan is the only country in APAC to have completed an IGA with the US. In its decision to enter into a Model 2 IGA with the US, Japan has placed much of the FATCA compliance burden on its FFIs who, under the Model 2 IGA, are generally required to deal directly with the US Internal Revenue Service (“IRS”).7

The Model 2 IGA is not reciprocal, meaning that the US will receive information about its citizens' investments, but the Japanese government will not in turn receive information about Japanese citizens' investments in the US.

The terms of the Japanese IGA are outlined in a Joint Statement of Mutual Cooperation and Understanding (“MCU”) to facilitate the implementation of FATCA, released on June 11, 2013 by both Japan and the US. The terms of the statement indicate Japan's intention to comply with the US initiative, and include the following:


• Japanese FFIs must register with the IRS Online Portal by January 1, 2014 (delayed until July 1, 2014);8

• A reporting Japanese FFI will report annually to the IRS on its US account holders and obtain consent to report information from nonparticipating Japanese FFIs and new accounts identified as reportable accounts under FATCA;

• Pursuant to the MCU, the US may make group requests to the Japanese Tax Authority based on the aggregate information reported to the IRS with respect to non-consenting US accounts and foreign reportable amounts paid to nonparticipating Japanese FFIs; and

• Annex II of the MCU lists definitions of certain FFIs, accounts, and funds that have a reduced FATCA compliance obligation.


Aside from the MCU, as of December 3, 2013, Japan has not released any other detailed guidance on the rules affecting Japanese FFIs.

B. Singapore

Singapore released a statement on July 18, 2013 stating that the Ministry of Finance (“MOF”) was conducting a public consultation on the proposed amendments to the country's Exchange of Information (“EOI”) regime.9 Consistent with FATCA compliance, the MOF announced the following measures to strengthen its country's framework for international tax co-operation:

• Extend EOI assistance in accordance with the internationally agreed standard to all of its existing tax agreement partners, without having to update individually the bilateral tax agreements;

• Allow Singapore's tax authority to obtain bank and trust information from FFIs for EOI purposes without having to seek a court order; and

• Conclude and implement an IGA with the US to facilitate Singapore's compliance with FATCA.


Pursuant to the public inspection, the MOF received 82 suggestions, of which 26 suggestions were accepted and are to be incorporated into the revised Income Tax (Amendment) Bill 2013.10 Included in the suggestions were enhancements to Singapore's framework for the EOI regime.

Though Singapore has not yet finalised its EOI regime, nor has it entered into an IGA with the US, on Wednesday, November 13, 2013, the US Treasury Secretary visited Singapore to further discuss international policies between the countries, demonstrating the continuing effort between the countries to solidify an agreement.11 Singapore has noted that it intends to enter into a Model 1 IGA.

C. Australia

The Australian government is exploring the feasibility of an IGA with the US. The Australian Treasury has noted that the objective of such an agreement would be to minimise compliance costs for Australia and the US.

Accordingly, the Australian Treasury has invited written submissions from FFIs on the advantages and disadvantages of an IGA between Australia and the US, based on the published US Model IGA, as an alternative to individual agreements between Australian financial institutions and the IRS.12

D. New Zealand

The New Zealand government has announced its intentions to discuss an IGA with the US.13 To that end, the New Zealand Inland Revenue Department has officially stated that it is currently negotiating an IGA with the US, the terms of which stipulate that FFIs will send FATCA information directly to the Inland Revenue.14

E. China

While China has not officially announced an IGA with the US, it has recently made advances in the effort to combat offshore tax evasion. On August 27, 2013, China signed the Multilateral Convention on Mutual Assistance in Tax Matters at a ceremony at the Organisation for Economic Co-operation and Development (“OECD”).15 This demonstrates China's initiative to move forward with changing laws.

F. Hong Kong

On July 10, 2013, the Hong Kong Legislative Council passed the Inland Revenue (Amendment) Bill 2013. The Bill amended laws to enable Hong Kong to enter into standalone tax information exchange agreements (“TIEAs”) and to enhance the existing exchange of information (“EOI”) arrangements under comprehensive avoidance of double taxation agreements to meet the international standard adopting a minimum necessary approach.16 This is a step forward for Hong Kong to be able to enter into an IGA with the US.17

G. India

The US Treasury announced on November 8, 2012 that it was engaged with India, amongst other jurisdictions, to implement FATCA negotiations.18 There is no indication as to which version of an IGA India intends to initiate.

H. South Korea

South Korea is actively engaged in dialogue with the US but has not officially reached an agreement.19 It is not clear what type of IGA South Korea intends to enter into, if it in fact chooses to do so.

III. Conclusion

While compliance with FATCA depends on each FFI's country of domicile, an FFI must generally demonstrate its compliance through an IGA or FFI agreement to avoid FATCA withholding. Accordingly, agreements between the US and FATCA partner countries are fundamental to incorporating FATCA's objectives. As 2014 unfolds, BNY Mellon expects more developments in the form of IGAs and TIEAs from the APAC region.

FATCA Timeline for FFIs with Agreements effective June 30, 2014*

  2014   2015   2016   2017/2018  
FFI governance   January 1, 2014

Electronic Registration via IRS Online Portal not finalised until January 2014 Paper registration not accepted until January 1, 2014

April 25, 2014

Last day to register for inclusion on first IRS FFI List

June 2, 2014

First IRS FFI List published

June 30, 2014

Effective date for FFI agreement for PFFIs that receive GIIN prior to July 1, 2014
  January 1, 2016

Expanded affiliated group transition period ends for Limited FFIs and Limited Branches

August 29, 2016

Responsible Officer (“RO”) must certify completion of account identification procedures for all other preexisting individual accounts

December 31, 2016

Last day for qualification as Limited Life Debt Investment Entity
June 30, 2017

End of first compliance certification period

December 31, 2017

First certification of compliance and effective internal controls required
Due diligence for preexisting accounts   Jul 1, 2014

New account opening procedures must be in place to identify US accounts

December 31, 2014

Complete due diligence for any preexisting account holders that are prima facie FFIs
June 30, 2015

Complete due diligence for pre-existing high value accounts
June 30, 2016

Complete due diligence for other preexisting entity and individual accounts
Due diligence for new accounts   July 1, 2014

Cutoff date for grandfathered obligations and associated collateral
Withholding   July 1, 2014

Begin FATCA withholding on US source FDAP income for insufficiently documented new entity accounts and NPFFIs
January 1, 2015

Begin FATCA withholding on preexisting entity account holders that are undocumented prima facie FFIs

July 1, 2015

FFIs required to withhold on undocumented high value individual accounts
July 1, 2016

Begin FATCA withholding on remaining undocumented pre-existing accounts
January 1, 2017

Begin FATCA withholding on gross proceeds and potentially for foreign “passthru”payments
Reporting     March 15, 2015

Begin Form 1042-S reporting for US source FDAP income for calendar year 2014

March 31, 2015

Begin reporting on Form 8966 for recalcitrant accounts

March 21, 2015

Report name, address, TIN, account # and balance on Form 8966
March 15, 2016

Form 1042-S reporting includes amounts paid to NPFIs during 2015 (also applies to calendar year 2016)

March 31, 2016

Limited FATCA reporting on Form 8966 for calendar year 2015 includes income payments
March 21, 2017

Full FATCA reporting on Form 8966 begins for calendar year 2016

March 15, 2018

Form 1042-S reporting on gross proceeds and potentially for foreign “passthru” payments for calendar year 2017

*Note: those FFIs in Model 1 or Model 2 IGA countries may have some differing requirements.  

Anthony Leone is an Associate in Global Transaction Services at BNY Mellon in Pittsburgh. He may be contacted by email at aleone@bnymellon.

Michael Chan is Managing Director and Asia-Pacific Head of Asset Servicing at BNY Mellon in Singapore. He may be contacted by email at

BNY Mellon and its affiliates do not provide tax advice and, as such, any discussion of US tax matters in this communication is not intended or written by the BNY Mellon and its affiliates to be used, and cannot be used, by a client or any other person or entity for the purpose of (i) avoiding tax penalties that may be imposed by any governmental taxing authority or agency, or (ii) promoting, marketing or recommending to another party any matters addressed herein.
BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation. Additional information is available on




1 Regulations Relating to Information Reporting by Foreign Financial Institutions and Withholding on Certain Payments to Foreign Financial Institutions and Other Foreign Entities, 78 Fed. Reg. 5873, January 28, 2013, or Preamble to FATCA.  


2 US Dept. of Treas., Resource Center, Tax Policy, Treaties, FATCA-Archive, December 4, 2013.  


3 Id.  


4 IRS Notice 2013-43,2013-31 IRB 113, Section III.  


5 IRS Notice 2013-69, 2013-46 IRB 503.  


6 There is a potential legal issue where an FFI is domiciled in a country whose data privacy laws prevent the FFI from disclosing FATCA information.  


7 US Dept. of Treas., Statement of Mutual Cooperation and Understanding between the US Department of the Treasury and the Authorities of Japan to Improve International Tax Compliance and to Facilitate Implementation of FATCA, June 11, 2013.  


8 Originally the MCU stated that registration should be completed by January 1, 2014, however the “favourable terms” clause (Section 6 of the MCU) should extend the registration date by six months, pursuant to IRS Notice 2013-43.  


9 Singapore Ministry of Finance, Public Consultation on Amendments To The Income Tax Act To Incorporate Changes To Our Exchange of Information (EOI) Regime.  


10 Singapore Ministry of Finance, Summary of Reposes - Public Consultation on Draft Income Tax (Amendment) Bill 2013.  


11 US Dept. of Treas., Treasury Notes, Secretary Starts Asia Trip with Op-Ed and Visit to Japan, 11 November 2013.  


12 Australian Treasury, Intergovernmental Agreement To Implement FATCA, 28 August 2012, Invitation to Comment.  


13 New Zealand government Releases: Govt to pursue FATCA agreement with US: October 25, 2012; Govt to minimise FATCA business costs, May 14, 2013.  


14 New Zealand Inland Revenue, FATCA web page, December 13, 2013.  


15 OECD, Centre for Tax Policy and Administration: China joins international efforts to end tax evasion, August 27, 2013.  


16 Hong Kong Legislative Council, Brief, Inland Revenue (Amendment) Bill 2013.  


17 Hong Kong Legislative Council, Panel of Financial Affairs November 5, 2012, LC Paper No. CB(1)359/12-13.  


18 US Dept. of Treas., Press Center, US Engaging with More than 50 Jurisdictions to Curtail Offshore Tax Evasion, November 8, 2013.  


19 Id.  


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