Russian parliament approves compliance with US tax law

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The upper house of parliament in Russia has given the go-ahead to new legislation allowing banks to hand information about their foreign clients to the US Treasury, it was reported today.

If the new rules, which still need to be approved by President Putin, come into effect, Russia will join around 70 other countries that have made similar pacts to allow their firms to comply with new US tax laws. Negotiations with Russia were underway earlier this year, but were interrupted by the Ukraine crisis.

The agreement is part of the US Foreign Account Tax Compliance Act (FATCA), developed in response to a tax-dodging scandal whereby Americans used secret Swiss bank accounts to conceal their cash. The Act requires that overseas financial institutions share information about any American-owned accounts containing over $50,000 with the US Internal Revenue Service (IRS).

Risks associated with FATCA are already making some Russian organisations uneasy. VTB, the country’s second-largest bank, said that it will phase out doing business with 2,000 Russia-based US taxpayers, including individuals and corporate clients.

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