UPDATE:

Russian Finance Minister wants to discuss FATCA agreement with US during visit to Washington

Innocente has provided a Google translation of a new Russian article from Vedomosti which is worthy of its own post.  It has also been added as a comment to this previous related post:  Why Russia’s oligarchy supports FATCA.

A week or two ago, it appeared that a FATCA agreement between the U.S. and Russia was close to being signed, despite the events in the Ukraine and Crimea.  Now there are fears that the U.S. may delay the agreement as a sanction for Russia’s annexation of the Crimean peninsula.

There appears to be much more at play here than meets the eye.  Russia has been demanding true reciprocity from the U.S. for any FATCA or FATCA-like deal.  The Crimean crisis may be just the excuse the U.S. needs to back away from a promise it has no Congressional authority to keep.  Empty promises haven’t kept dozens of other countries from signing IGA’s, but Russia has been steadfastly calling America’s bluff.  Now, FATCA may move to the very centre of the growing political, economic and military showdown between these two old Cold Warriors, especially once withholding penalties on pass-through payments begin to hit European and American banks.

Translated below is the Vedomosti.ru article dated March 31, 2014 entitled: “США могут отказаться подписывать с Россией соглашение о FATCA” :

U.S. may refuse to sign an agreement with Russia on FATCA
Russia is ready to join the U.S. law on the exchange of tax information. But the U.S. may refuse as a punishment for Crimea.
Margarita Papchenkova
Vedomosti.ru
31.03.2014

Last week, the Finance Ministry sent the government a draft directive on signing the agreement with the U.S. on the exchange of information, said two federal officials. Such an order was given to the Ministry of Finance at a meeting with First Deputy Prime Minister Igor Shuvalov said his representative, after the approval of the government will give directives to the Ministry sanctioned the negotiations with the U.S. . There are only technical obstacles, such as transfer agreements, says official familiar with the position of the Ministry of Finance. A ministry spokesman declined to comment.

In fact, we are talking about Russia’s accession to U.S. law FATCA (Foreign Account Tax Compliance Act). Requiring banks and financial institutions of all countries by March 31, 2015 to supply the U.S. Internal Revenue Service (IRS) information on operations of U.S. customers. If the bank does not attach to the system before July 1 this year, it faces sanctions: a payment to its address of any passive income from U.S. assets will be deducted 30 % tax (currently tax at source in the U.S. – 10% on dividends and 0% for percent). And in 2017 – with the proceeds from the sale of shares or bonds of U.S. companies, as well as ” transit fees “.

But the foreign bank can transmit information not directly but through the local tax authorities. To do this, the government should sign an agreement with the United States. This option was chosen, for example, by the UK and Germany.

Russia was going to conclude an agreement last summer but negotiations dragged on. It was decided not to sign an agreement on FATCA but a mutual exchange of information ( i.e., the United States is committed to providing information on Russian taxpayers). Draft agreement reproduces almost U.S. law, although FATCA it is not explicitly mentioned.

But now there may be a new unknown obstacle, which will determine whether the United States to sign an agreement, says an official involved in the discussion of the project: “As long as the signals from the United States have been reported, neither good nor bad .” Washington could delay the signing, the Ministry of Finance officials previously feared: it can become an informal sanction for the Crimea annexation.

Damage to the financial system can be overwhelming. 30% tax on payments to Russian banks and financial companies should hold not only American, but also any banks that joined the FATCA, including European. Also there is a danger that banks will close correspondent accounts of those who have not joined the FATCA, then may lock dollar payments feared Russian banker.

U.S. Treasury refused to comment on the talks. Last week, Finance Minister Anton Siluanov reassured: the worsening of relations does not lead to the transfer agreement not being signed – but officials will do everything so that banks can provide information to IRS.

The government is preparing a fallback really tells White House staffer – to allow banks to transfer information IRS directly. But you have to change Russian law.

By July 1, banks may have to choose: to fulfill the Russian law and incur losses or American, breaking  Russian law, laments the director ‘s compliance PSB Svetlana Yermolayeva. Legal risks arise due to retention and a 30% tax on income customers who have been recognized by the Americans, explains Yermolayeva, Russian law does not provide for retention of direct customer funds on the grounds set forth in FATCA.

Possible to meet the requirement of bank secrecy, even if not governed by law, according to the manager of another bank : finding American client to get his written consent, but better is directive for the transfer of information to the IRS. Technically it is possible, it is reassuring: system identification and interaction with clients been established in many banks.

In the performance of FATCA banks will face many other problems, warns the head of the group in the field of Compliance KPMG Dmitry Chistov. U.S. demand to disclose the accounts not only U.S. customers, but also the companies of which they are beneficiaries. At the same time under Russian law the beneficiary – the owner of not less than 25 % stake, and on FATCA – 0 or 10 % depending on the type of company, explains Chistov.

To start an independent exchange with the United States on July 1, banks should have until April 25 to register online IRS, obtain an identification code and enter into a contract with the IRS, reminds Chistov. Many from last year started to be registered at your own risk, employee knows Russian bank. “Given the political situation, it is possible that the agreement is not signed, and we can not wait that long – it is necessary to prepare for the execution of FATCA», – says the banker.”

http://www.vedomosti.ru/finance/news/24672711/nakazanie-dlya-bankov?full#cut