Japanese financial institutions will be required starting in 2015 to provide U.S. tax authorities with information about accounts held by Americans, sources said Friday.
The Japanese and U.S. governments entered on Friday the final stage of negotiations for signing a memorandum of understanding on detailed rules for putting the U.S. Foreign Account Tax Compliance Act (better known as FATCA) into practice in Japan.
They are expected to reach an agreement by the end of this month, the sources said.
Detailed rules for enforcement of the U.S. law, which is aimed at combating tax evasion by U.S. citizens using offshore bank accounts, will focus on exempting certain accounts at Japanese financial institutions from the duty to report account information to U.S. authorities in order to reduce their work.
Such accounts include those under workers’ asset-building savings schemes and related to pension programs that involve a relatively small risk of being used for tax evasion.
Most Japanese financial institutions will have the obligation to report, including banks, credit associations, agricultural and fishery cooperatives, brokerage houses and insurance companies.
These institutions will be registered with the U.S. Internal Revenue Service.
By the end of March 2015, after checking accounts and contracts, they will report to the IRS information on assets held by U.S. clients as of the end of 2014.
The Japanese and U.S. governments signed a pact in June 2012 to simplify procedures for implementing FATCA, in which they confirmed as a general rule that account information will be provided only on those held by U.S. nationals who agree to disclosure.
For people who do not agree to disclosure, only the total number of accounts and value of assets will be reported.