The United States Foreign Account Tax Compliance Act (FATCA) agreement between New Zealand and United States is directed at reducing tax evasion by US taxpayers.
New Zealand law firms with trust accounts are likely to be defined as “financial institutions” and could be subject to FATCA provisions. FATCA potentially has implications for the way New Zealand law firms with trust accounts conduct their practice. Law firms should consider whether the agreement applies to them and what action they will need to take.
The Law Society has prepared a Practice Briefing to provide more information on the regime to assist law firms with assessing their particular position and FATCA obligations.
The Law Society recommends that to help meet the requirements to certify in respect of clients, law firms (whether financial institutions or not) start obtaining information from their clients (as to whether they are US citizens or US tax residents) and consents to release that information.
Most law firms will elect to be 'non-financial foreign entities' rather than remain financial institutions. Law firms which are non-financial foreign entities may wish to use the following forms to collect information (Note: individual banks may require a different form and lawyers should check with their bank)
The forms also seek information on non-US tax residents in light of coming requirements for the OECD’s Common Reporting Standard. This will impose FATCA-like obligations on New Zealand law firms under agreements the New Zealand Government may enter into with the Governments of many other countries.