Macao and the United States of America have substantially concluded discussions on an inter-governmental agreement (IGA) Model 2 that will facilitate compliance with the US Foreign Account Tax Compliance Act (FATCA) by financial institutions in Macao.

FATCA is an anti-tax evasion regime enacted by the US to detect US taxpayers who use accounts with non-US financial institutions to conceal income and assets from the US Internal Revenue Service (IRS).

FATCA requires financial institutions outside of the US to report financial account information of US taxpayers to the US IRS. Failing this, relevant institutions will face repercussions in the form of withholding tax imposed by the US IRS on relevant US-sourced payments to them.

Following the completion of the substantive discussions, Macao and the US have reached agreement in substance as of November 30, 2014 to sign the IGA Model 2 in the near future.

Under the IGA, financial institutions in Macao already did the registration and concluded separate individual agreements with the US IRS. Under these agreements, these institutions will seek consent of their account holders who are US taxpayers for reporting their account information to the US IRS annually.

The IGA demonstrates Macao’s commitments to enhancing tax transparency in the international arena. It will lower compliance costs for the financial industry and safeguard the interests of the financial institution s and their clients.

The due diligence and reporting requirements under FATCA will only target specified US taxpayers including US citizens, or US resident individuals, or specified entities established in the US or controlled by US persons.