|Lei Wun Kong||Nuno Soares da Veiga|
While the purpose of Fatca may be to combat the tax evasion of US taxpayers, compliance with Fatca poses a challenge to Macau financial institutions striving to comply with local laws, in particular the Financial System Act (FSA).
Under article 78 of the FSA, Macau financial institutions have a duty to maintain secrecy, which covers names and other information related to customers, deposit accounts and respective transactions, application of funds and other banking operations. Article 80 of the FSA provides that the duty to keep confidential facts or other information concerning relations between the institution and its customers may only be waived with the customer's consent or by court order under the terms provided for in the Macau Criminal Procedure Code. Therefore, without the consent of the US clients, Macau financial institutions are generally not legally permitted to transfer their personal data to the IRS, thus running the risk of being subject to the 30% withholding tax on their US investments and US-source income.
Macau financial institutions could terminate the accounts of the US clients who refuse to give their consent. However, this action might be regarded as abuse of law, under article 326 of the Macau Civil Code, insofar as the financial institution would be manifestly exceeding the limits of the principle of good faith, and exposing Macau financial institutions to eventual litigation.
It remains to be seen if and how Macau financial institutions will comply with Fatca and whether the Macau SAR will eventually enter into an inter-governmental agreement with the US, which could remove some privacy considerations when reporting the required information to the IRS.
Lei Wun Kong and Nuno Soares da Veiga
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