Financial institutions will face a greater burden of information
reporting for clients who are US citizens and hold assets in South
This is as a result of the Foreign Account Tax Compliance Act
(FATCA). "The purpose of the new Act is to ensure that the US
Internal Revenue Service can identify and collect the appropriate
tax from US persons holding financial assets outside the US,"
says Hylton Cameron, Associate Director at Grant Thornton.
The Act will place a significantly increased burden on any
non-US Foreign Financial Institution such as banks, funds, asset
managers and insurance companies, who must indentify, document and
report on US persons' assets.
The key challenge now is for banks to ensure that they comply
with FATCA's regulations and that they are fully aware of the
associated implications and obligations.
"The identification and documentation requirements for
customers will become considerably more demanding with the burden
of proof residing with financial institutions," says
Account holders who do not comply with this legislation may be
subject to additional tax charges, as they may have to pay a 30%
withholding tax on US source payments which include interest and
dividends. It will possibly also affect investment management
"Any firm that accepts deposits, holds financial assets for
the account of others or is engaged in investing or trading
securities or any interest in such securities falls potentially
within the FATCA's scope. This is a major change to the
information reporting and withholding tax regime and imposes new
far-reaching compliance obligations," says Cameron.
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The expansion of the West African regional market to foreign investors, and the search for emerging markets has led to a continuous increase in business mobility and cross border investments with Nigeria.
Effective collaboration amongst government agencies, automation of processes and capacity building by tax authorities have always been identified by stakeholders as strategies for achieving an efficient tax system.
The major objective of the waiver is to promote voluntary compliance and consequently generate revenue for government which otherwise, could have been lost.
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