Cape Town 101028. Deputy Finance Minister, Nhlanhla Nene is his 120 Plein Street office. PHOTO SAM CLARK, CA, Gaye Davis

Johannesburg - South Africa and the US agreed on Monday to put into effect the Foreign Account Tax Compliance Act (Fatca), the SA Revenue Service (Sars) and US Embassy said.

The agreement was signed in Pretoria by Finance Minister Nhlanhla Nene and United States ambassador to South Africa Patrick Gaspard.

“This agreement promotes transparency between the two nations on tax matters and furthermore underscores growing international co-operation in the endeavour to end tax evasion world-wide,” the two parties said in a joint statement.

The US enacted Fatca in 2010 to curtail offshore tax evasion by encouraging transparency and obtaining information on accounts held by US citizens in other countries.

Under Fatca foreign financial institutions should provide the US Internal Revenue Service with information about US account holders annually.

Failing this, a 30 percent withholding tax would be imposed on the foreign financial institution with regard to certain US source payments, such as interest.

“The withholding tax is, however, waived if foreign financial institutions enter into disclosure compliance agreements with the US Treasury,” they said.

In July 2012, the US introduced the option of a country entering into an intergovernmental agreement, which alleviated the need for financial institutions to enter directly into an agreement with the United States.

The Fatca agreement between the US and South Africa was a reciprocal one.

Nene said: “South Africa is committed to automatic exchange of information for tax purposes and to thereby make the world a more transparent place from a tax perspective.”

Gaspard, who signed on behalf of the United States, said: “The signing of these agreements is an important step forward in the collaboration between the United States and South Africa to combat tax evasion.” - Sapa