The agreement, on the application of the Foreign Account Tax Compliance Act (FATCA), is part of the increasing international cooperation in combating tax evasion round the world.
“The signing of this agreement is an important step in cooperation between the US and Croatia in preventing tax fraud and tax evasion. Failure by taxpayers to meet their tax obligations leads to an uneven distribution of the tax burden to the detriment of those that duly pay their taxes. FATCA is an important part of cooperation between the governments of the US and Croatia in dealing with this issue,” a statement from the Ministry of Finance said, adding that Croatia would adopt the OECD standard for the automatic exchange of information on financial accounts, which will also enable an automatic exchange of information with EU member states and with third countries.
FATCA requires foreign financial institutions to report to the US Internal Revenue Service (IRS) once a year, directly or indirectly through competent authorities, information concerning assets held by US citizens in accounts abroad. Under the new agreement financial institutions in Croatia will be required to submit information on accounts in Croatia held by US national. This information will be available to the IRS. The IRS will also do the same and inform the Croatian Tax Authority regarding accounts held by Croatian nationals in the United States.