Exchange of Tax Information and the Impact of FATCA for China
LexisNexis Guide to FATCA Compliance (Matthew Bender 2014).
10 Pages Posted: 26 Jul 2014 Last revised: 27 Jul 2014
Date Written: March 1, 2014
Without an express consent and authorization from the customer in relation to a FATCA disclosure, Chinese Foreign Financial Institutions' ("FFIs") compliance with FATCA would be in conflict with relevant domestic laws. However, under Chinese laws, Chinese authorities have broad powers to obtain tax information from taxpayers, withholding agents and third parties including banks. There is an adequate institutional framework and adequate mechanisms in place for Chinese tax authorities to effectively carry out an exchange of tax information. Also, China signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters on August 27, 2013, which expands China's capacity to exchange tax information exchange.
According to the Release of Joint Outcomes of the Economic Track under the U.S.-China Strategic and Economic Dialogue V, the Chinese government and the U.S. government agree that each government will exert its best effort to enter into an intergovernmental agreement ("IGA") to implement FATCA before a deadline of January 2014 (as of November 2013, no such IGA had been concluded). The IGA between China and the U.S. would relieve Chinese FFIs of the conflicted obligations imposed by domestic laws and FATCA. However, it is not clear when China and the U.S. will sign the IGA.
This chapter will give an overview of Chinese tax authorities' powers to obtain information and the basis for international information exchange. The domestic regulations on exchange of information and domestic impediments to FATCA compliance will also be discussed.
Keywords: FATCA, China
JEL Classification: K34, K20, H26
Suggested Citation: Suggested Citation