The Study On The Impact Of FATCA On Chinese Financial Institutions

Since the financial crisis in 2008, the fiscal revenue of United States continued tight, the budget deficit Increased day after day. In the domestic economy situation, the US government focused on combating source of overseas tax havens. From May in 2008, the US federal government launched an attack to the second largest of world private wealth management group-UBS AG. UBS which was known as secret accounts was accused of helping US clients evade domestic taxes amounted to US $ 20 billion. The US government hopes to obtain this tax evasion of account information of American by suing the UBS. In the end, UBS was lawsuit provide 5000 secret accounts information of US customers to the IRS. Following the federal government breaking the confidentiality system of the UBS, they turned to focus on the third party consultant — financial institution who helping US clients evading taxes. In 2010 the US government launched the "Foreign Account Tax Compliance Act"(hereinafter referred to as FATCA), which required financial inst itutions of the agreement country to report the US Government cus tomer account information to US Governments, such as the non-cooperation of the financial institut ions, their income from the United States will be subject to a 30% withholding tax.The bill as part of the US tax code, and is typical of domestic law, however the regulation of the object is aim to financial institutions of other country. In this way, the “long arm jurisdiction" make the atmosphere of territory in the world's financial institut ions. However before the implementat ion details of FATCA have not yet be introduced, no other way except to wait and see. After the US government launched a cooperation agreement template I and template II, which are the agreement between the governments and directly report to financial institut ions protocol respectively. Intergovernmental agreement is signed by the governments of the two countries on the FATCA bill cooperation agreement, i.e., cooperation of the domestic financial institut ions will only report the information under USA government required. And the national government can filt er the related informat ion first, and then submit them to USA governments. This method avoids the risk of the violation of domestic laws and regulation, and it also makes the cooperation more fairness. The Chinese government has made an agreement of FATCA Model 1 with Am erica. And with the help of related regulators, the financial institut ions of China should get ready for this circumstance.