Caribbean Urged To Conclude FATCA IGAs
by Mike Godfrey, Lowtax.net, Washington
06 September, 2016
The Caribbean Association of Banks has urged all Caribbean countries to finalize intergovernmental agreements with the US to facilitate compliance with the US Foreign Account Tax Compliance Act (FATCA).
FATCA, enacted by the US Congress in 2010, requires all financial institutions (FIs) outside of the United States to submit regular information to the IRS on financial accounts held by US persons with a value of at least USD50,000. Otherwise, certain payments of US-sourced income face a 30 percent withholding tax.
To ease the burden of complying with FATCA, the US has negotiated intergovernmental agreements (IGAs) with a number of partner jurisdictions, providing for centralized data transmission and, for some territories, reciprocal information exchange.
The CAB recommends that all IGAs should be signed and all relevant regulations/legislation should be in force before December 31, 2016. Failure to do so could result in significant repercussions for foreign financial institutions (FFIs) within these jurisdictions.
The US Internal Revenue Service (IRS) released an update at the end of July (Announcement 2016-27i) with changes that will affect those countries that do not have an IGA in force. According to the announcement, on January 1, 2017, the US Treasury will begin updating their IGA list to reevaluate the progress of all jurisdictions that have failed to bring their IGAs into force.
Each jurisdiction with an IGA that is not yet in force and wishes to continue to be treated as having an IGA in effect must provide to the US Treasury by December 31, 2016, a detailed explanation of why the IGA is not yet in force and a step-by-step plan (including dates) that they intend to follow to bring the IGA into force. Thereafter, jurisdictions will be given at least 60 days for the US Treasury to assess their status.
FFIs within a jurisdiction that ceases to be treated as if it has an IGA in effect will generally have to enter into an FFI agreement with the IRS in order to comply with their FATCA obligations, unless they qualify for an exemption under the FATCA regulations. Failure to do so will expose the FFI to a 30 percent withholding tax on certain US payment transactions.
The Caribbean countries with IGAs in force, as at August 30, 2016, are: Bahamas, Barbados, the British Virgin Islands, the Cayman Islands, Curacao, Jamaica, Saint Kitts and Nevis, Saint Vincent and the Grenadines, and the Turks and Caicos Islands.
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