The Bureau of Internal Revenue will start to automatically report all financial accounts held by US citizens living and working in the Philippines to the IRS – the kicker? the US will also give BIR the account information of all Filipinos living within the US as well.
The move comes after the Finance Secretary Cesar V. Purisima and US Ambassador to the Philippines, Philip S. Goldberg signed an agreement this past Monday on the reciprocal inter-government information that will pave the way for implementation under the Foreign Account Tax Compliance law of the United States, otherwise known as FATCA.
FATCA was enacted by the United States Congress in 2010 to prevent US citizens from withholding information about their assets overseas.
Purisima said signing of the IGA “underscores the growing international cooperation to curb offshore tax evasion and avoidance.”
“It also solidified the country’s bid to further promote fiscal transparency in Asia Pacific,” he said.
“In fact, fiscal transparency is one of the four pillars of the Cebu Action Plan (CAP) the Philippines is advancing in its hosting of the Asia Pacific Economic Cooperation (APEC) Finance Ministers’ Process (FMP) meetings,” he disclosed.
“Tax evasion across borders is an alarming problem that we can beat back with openness and mutual cooperation. This IGA is an affirmation of that ideal,” he added.
Goldberg said after signing the agreement that IGA “marks a significant step forward in our efforts to work collaboratively to combat offshore tax evasion — an objective that mutually benefits our two countries.”
“By working together to detect, deter, and discourage tax abuses through increased transparency and enhanced reporting, we can help to build a stronger, more stable, and more accountable global financial system,” he added.
Prior to the agreement the two countries had a treaty for exchanging information that was provided upon request of any governing party.
The Philippines banking authority originally said the agreement was based on the banks business decision, but later recanted that statement and said that all banks within the Philippines must comply with the FATCA ruling.
Those not in compliance to the FATCA ruling are subject to 30% withholding tax for the U.S.-sourced income placed by US Citizens within their banking institution.