The United States and South Korea now have a preventative measure to deal with offshore tax evasion.
South Korean and U.S. governments have finally ratified the Foreign Account Tax Compliance Act (FATCA) on Thursday, which has been postponed for more than a year despite the agreement that was made in June 2015.
As a result, the two countries can exchange information of taxpayer’s financial information. Under the circumstances, the U.S. government can access financial accounts of American citizens with more than $50,000 in a South Korean bank. However, the earliest the effects of FATCA could began is later this year.
The U.S. currently has similar agreements in place with 112 other countries to prevent offshore tax evasion. Taxpayers in the U.S. are required to file a report to the Internal Revenue Service if they possess more than $50,000 in a bank account overseas.
Under the conditions of FATCA, South Korean financial institutions must provide names, account numbers, balance and amount of interest of those Americans to the IRS.
South Korea and the U.S. agreed to sign FATCA in June of last year, but the former’s national assembly has postponed its ratification until recently. The South Korean government added that whether or not it will provide financial information of taxpayers in 2014 and 2015 will be decided after further negotiation with the U.S.
By Sung Cheol Jin