Pakistan has decided to divulge all the financial information of the Pakistani origin US citizens with the government of United States to prevent local financial institutions from heavy fines.
An official source said the decision was made following the enforcement of the Foreign Accounts Tax Compliance Act (FACTA) by the US. The act wants all the information about the investments, revenues and proceeds from investments undertaken by a US citizen, irrespective of location, needs to be reported to the Internal Revenue Service (IRS) of US.
Pakistan’s apex regulators State Bank of Pakistan (SBP) and Securities and Exchange Commission of Pakistan (SECP) have issued necessary instructions to banks, financial institutions, brokerage companies and insurance companies to comply with the requirements of the FACTA compliance.
The circular asks the local financial institutions to do necessary work for getting registration with US IRA, to avoid 30 per cent withholding on US source income and gross proceeds. The ministry of finance has formed a working group consisting of officials from the finance division, SBP, SECP and FBR to coordinate and tackle the emerging situation. The government is under US pressure to sign an agreement to share information regarding US nationals and companies account. Already 21 countries have signed agreement with US while 28 more are to follow the suit. The government has still not made its mind but wants its financial institutions to comply with, the source added.
To counter US taxpayers from hiding taxable income in off shore accounts, FACTA requires US withholding agents to withhold 30 per cent tax on certain payments to foreign financial institutions (FFIs) that do not agree to report information to US government about their accounts. FACTA wants all the information about the investments, revenues and proceeds from investments undertaken by a US citizen, irrespective of location, needs to be reported to the IRS.
