Taipei,Oct.8,2012(CENS)--Offshore mutual funds in the U.S.sold by domestic financial institutions will be subject to 30%tax levied by the U.S.government,should they fail to sign related agreement with the U.S.according to a Foreign Account Tax Compliance Act(FATCA),pointed out the Financial Supervisory Commission(FSC).
According to the statistics of the Securities Investment Trust and Consulting Association,as of the end of July this year,Taiwanese people had invested NT$2.4 trillion in offshore mutual funds,including over NT$1.3 trillion in the U.S.
FATCA,scheduled to hit the road next year,targets overseas income of U.S.citizens but will affect domestic investors by accident.The FSC and the Ministry of Finance(MOF)have set up a task force jointly to negotiate with the U.S.government seeking solution of the problem.
According to FATCA,the U.S.government will ask financial institutions worldwide to provide financial information on U.S.citizens to the U.S.government for the purpose of tax checking.From next year,foreign financial institutions will have to sign agreement with the U.S.government for providing financial information on U.S.citizens,bringing much trouble to them in executing the requirement.
Should financial institutions refuse to sign the agreement with the U.S.,their related incomes in the U.S.will be subject to 30%tax.Since Taiwanese people subscribe to offshore mutual funds via banking trust funds,which are invested with the name of the banks,domestic investors will liable to 30%tax for their profits from mutual funds with investments in the U.S.
For example,should a certain offshore mutual fund invest in Apple stocks,it will be subject to 30%tax for stock dividend issued by Apple.Whenever investors redeem their investments from the mutual fund,their capital gains will also be levied with 30%tax.According to the U.S.regulation,stock dividend will be liable to 30%tax from 2014 and capital gains from redemption of investments will be taxed at 30%rate from 2016.
In addition to financial institutions selling mutual funds,custodian institutions for investment funds will also have to sign similar agreement with the U.S.,in order to avoid the 30%tax.
An FSC official noted that the aforementioned task force is formulating strategy and countermeasures,for compliance by domestic financial institutions,so as to help domestic investors avoid the impact.
