FATCA – announcement on status of negotiations
Tax Alert, April 2014
As announced earlier, in relation to implementation of the American Foreign Accounts Tax Compliance Act (FATCA) the Republic of Croatia (Croatia) will, as the majority of European Union member states, with the United States of America (USA) sign so called Model 1A FATCA Agreement (Agreement). The Agreement will be based on reciprocity and implemented by automatic exchange of information between the tax administrations. In practice this means that financial institutions will supply information to the Croatian Tax Administration that will further exchange that information with the American Tax Administration. This will work in other direction also, meaning that the Croatian Tax Administration will receive information about the Croatian tax residents having accounts in the US financial institutions. FATCA will come into effect as of 1 July 2014, by which date the Agreement between the US and the Croatian governments should be signed.
The Tax Administration has published notification about the status of the negotiations on the Agreement on its official Internet site. According to the notification, the Croatian Government brought the Decision on the commencement of the procedures for signing the Agreement between the Government of the Republic of Croatia and the Government of the Unites States of America with aim to execution of tax liabilities on international level and implementation of FATCA on 20 February 2014. The Croatian team includes representatives from the Ministry of Finance, Tax Administration, Croatian National Bank, Croatian Financial Services Supervisory Agency and the Ministry of foreign and European affairs.
According to the notification, the Tax Administration is negotiating alignment of the texts and the final signing of the Agreement with the US body in charge (that being US treasury). In accordance with the statements of the Croatian National Bank and the Croatian Association of Banks, it was proposed to the American side that the Croatian housing savings institutions are included in Annex II of the Agreement as Croatian non-reporting FATCA compliant institutions. Provided replies of the American side are satisfactory and optimal for the parties, they will take actions to prepare signing of the Agreement.
Considering that reporting towards the American body in charge for FATCA should commence in September 2015 and that the tax administrations have to additionally agree on implementation manners, the Ministry of finance announced that it will publish all relevant information about the status of negotiations on the Agreement and implementation of FATCA on its official Internet sites.