Bangladeshis, holding Green Cards in the US, will now have to pay tax on money they have in their accounts in Bangladesh under a new US law designed to crack down on offshore tax dodging.
Approved in 2010 after a tax-avoidance scandal involving a Swiss bank, the Foreign Account Tax Compliance Act (FATCA) requires most foreign banks and investment funds to report to the Internal Revenue Service (IRS) information about US customers’ accounts worth $50,000 or more.
The Bangladesh Bank has directed all commercial banks and financial institutions to comply with the law.
The law aims at realising tax from US citizens and Green Card Holders with Tax Identification Number (TIN) on their income outside the United States.
In a circular, the Bangladesh Bank has said banks and financial institutions will have to provide information to the IRS if any US citizen or Green Card Holder has accounts with them.
The law will be enforced from July 1 this year. If any bank or financial institution does not comply, the FATCA allows the US to charge 30 percent ‘withhold tax’ from the income of that institution.
As per the law, information on the US citizens or Green Card Holders, their bank account numbers, addresses, US TIN and situation of the account will have to be provided to the IRS every six months.
The US treasury department hopes the move will boost their yearly revenue collection by at least $800 million.
The country has signed agreements with various other countries to implement this law. As per the agreement, governments will provide information to the IRS.
However, if the government does not want to enter an agreement, banks and financial institutions of that country will have to directly register with the IRS and provide these information.
Bangladesh is yet to sign an agreement with the US over the new law. For this, the banks and other financial institutions will have to provide information directly to the IRS. They will have to register with the IRS within next April.
In case an internal law of a country bars providing such information, the institutions will have to take written permission from their clients. Bangladesh has such obligations.
Sections 5 and 6 of ‘The Banker Book of Evidence Act-1891’ stipulate maintaining privacy of a client’s account and transaction. Such information can only be given out if the court issues an order.
For this, the Bangladesh Bank ordered the banks to take no-objection letters from the clients before providing the IRS such information.
If a client refuses to give no-objection letter, the central bank has ordered to close his/her account.
US-based Citibank NA will conduct a workshop on Jan 28 on the issue with representatives of all commercial banks and Bangladesh Bank’s concerned officials.
Several hundred thousand Bangladeshis are living in the US. Many of them went there on DV lottery, student and professional visas. A number of Bangladeshis have secured US citizenships, hold Green Cards and pay taxes.
Many of these expatriates inherit ancestral properties in Bangladesh or have immovable properties that are a source of income. From now on, they will have to pay the US tax against their income.
