NZ set to comply with US tax rule
New Zealand is ready to comply with a controversial United States anti-tax avoidance law after a local law change.
The Taxation (Annual Rates, Employee Allowances and Remedial Matters) Bill passed yesterday, allowing New Zealand financial institutions to comply with America's Foreign Account Tax Compliance Act (Fatca).
It followed an intergovernmental agreement signed last week between New Zealand and the US.
Fatca, which will be phased in from next month, aims to reduce tax evasion by Americans who have financial accounts outside the US.
It requires financial institutions around the world, including New Zealand banks, to provide relevant information about customers who are US "persons".
Without yesterday's law change, New Zealand financial institutions would have been unable to comply with Fatca because of privacy laws preventing them handing over information on their US clients.
New Zealand Bankers' Association chief executive Kirk Hope said this could have resulted in banks being penalised by a 30 per cent withholding tax on principal and income from investments in the US.
"Our banks and New Zealand have little choice but to comply with Fatca," he said.
"US capital markets provide much of the funding most banks need to lend to New Zealand households and businesses, so there would be a huge impact on our economy if we didn't comply.
"Complying with Fatca also allows our banks to continue to provide services to US citizens and residents who have New Zealand bank accounts."
The amendment requires all financial institutions to collect information to determine whether a customer is a US person and to disclose required information to Inland Revenue.
Under the agreement signed last week, Inland Revenue collates this information and passes it on to the US Internal Revenue Service.