BVI Issues FATCA Guidance Notes
by Mike Godfrey, Lowtax.net, Washington
30 July, 2014
The British Virgin Islands have published guidance notes on requirements under their intergovernmental agreements (IGAs) to facilitate automatic information exchange with the United States and the United Kingdom.
The guidance notes are looked on as a key part of the BVI's regime for the implementation of the US and UK IGAs, and were prepared in conjunction with the recommendations of the Foreign Accounts Tax Compliance Act (FATCA) Working Group, which comprised members of the private sector, and primary legislation considered by the BVI's House of Assembly on July 22.
FATCA, which was enacted by Congress in 2010, took effect on July 1, 2014, and targets non-compliance by US taxpayers using foreign accounts. It requires US financial institutions to withhold 30 percent of certain payments made to foreign financial institutions (FFIs) that do not agree to identify and report information on US account holders. Foreign governments have two options for complying with FATCA: they can either permit their FFIs to enter into agreements with the Internal Revenue Service (IRS), or they can themselves enter into IGAs with the US.
The US Treasury has developed two alternative model IGAs. Under the Model 1B agreement signed by the BVI, FFIs will identify all relevant reportable accounts and provide the required information to the BVI International Tax Authority, who will then relay that information to the IRS.
On November 28, 2013, the BVI Government and the UK signed an IGA, and then, on June 30 this year, an IGA was signed with the US. As a result, it was confirmed that FATCA's withholding tax and account information requirements will not apply to BVI FFIs, apart from where there are circumstances of unresolved significant non-compliance.
During the parliamentary session held to consider the IGA legislation, the BVI's Premier and Minister of Finance, Orlando Smith, confirmed that the obligation to provide information by BVI FFIs under FATCA "does not, in itself, put any new obligations on those islanders who, in having dual nationality, also have to report to the US tax authorities. These obligations have always existed as part of the obligations of being a US person."
"However, the BVI Government will assist persons who consider themselves to need this support in meeting their reporting requirements to the US, by providing useful advice and identifying professionals versed in US tax matters," he said, adding: "We will announce the measures that we are taking to assist islanders who are also 'accidental' Americans, as we often refer to them, in coming up to speed on their commitments to the IRS."
The BVI Government, in collaboration with KPMG (BVI) Limited and Harney Westwood & Riegels, is also hosting two FATCA workshops for members of the financial services industry to provide feedback on the guidance notes.
Comments on the draft notes should be made to the FATCA Working Group within the Ministry of Finance no later than the close of business on August 15, 2014.
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