United States (US) Foreign Account Tax Compliance Act (FATCA)
Under FATCA, financial institutions outside the United States shall report each year to the US Internal Revenue Service (IRS) information about accounts held by US citizens. The said financial institutions that fail to comply with FATCA are subject to a 30% WHT on US-sourced ‘fixed, determinable, annual, or periodic income’, which shall be withheld by their counterparties in the United States.
In the absence of an intergovernmental agreement (IGA), participating foreign financial institutions (FFIs) in the Philippines individually signed an FFI Agreement with the IRS.
Under Model 1 of the IGA, FFIs will provide information on US accounts to the BIR, which information will be relayed to the IRS.
Currently, Model 1 of the IGA is treated as ‘in effect’ by the US Treasury as of 30 November 2014. The United States and the Philippines have reached an agreement in substance, and the Philippine government has consented to disclose this status. In accordance with this status, the text of such IGA has not been released and financial institutions in the Philippines are allowed to register on the FATCA registration website consistent with the treatment of having an IGA in effect, provided that the jurisdiction continues to demonstrate firm resolve to sign the IGA as soon as possible.
On 1 December 2016, President Duterte ratified the agreement that was then transmitted to the Senate on 6 December 2016 for concurrence but with no available status to date.