FATCA Registration Delayed
Local commercial banks and near banks regulated by the Bank of Jamaica (BOJ), as well as other entities regulated by the Financial Services Commission (FSC), which are counted as Foreign Financial Institutions (FFIs) under US law, should now be engaged in registering online with the United States Internal Revenue Service (IRS) which has set April as the deadline for signing up under the Foreign Account Tax Compliance Act (FATCA).
However, the BOJ indicated on Thursday that local stakeholders are awaiting the completion of an intergovernmental agreement (IGA) between Jamaica and the United States.
“The execution will allow the institutions to register as Reporting Financial Institutions under a Model 1 IGA ,” general counsel at the BOJ, Robin Sykes said.
The IGA is being developed by a technical working group and is expected to reduce costs as well as provide an easier reporting process. The IGA would allow the Jamaica Government to assume responsibility for reporting the data instead of individual firms.
Registration of financial firms required to report data under FATCA should have begun in November 2013 and will run until April 25, 2014. Reporting to the IRS commences in January 2015.
Sykes said that feedback received by the bank was that the registration process was being delayed as local FFIs seek to determine their status. “That’s why everyone is waiting on the IGA. Registering will be a lot easier with the IGA.”
An online registration portal is now open and may be accessed by FFIs.
However, Richard Murray, manager at the Jamaica Bankers’ Association (JBA) Secretariat in Kingston told the Sunday Business that “the JBA has not received any information from member banks which suggest that Jamaican entities have been having problems using the portal. The JBA continues to follow very closely information released by our own government officials regarding the progress Jamaica is making in relation to securing an inter-governmental agreement with the US authorities. The IGA will have a critical bearing on the FATCA reporting obligations that local FIs will be subject to.”
Credit union officials told the Sunday Business that the sector is in the same wait-and-see mode, but for a different reason. The unions are assessing whether or not they will be exempted from reporting as has been done in some jurisdictions.
Risk manager at the C&WJ Co-operative Credit Union, Joyce West-Johnson said “We have not yet completed our full assessment. The Credit Union League has sent out something to guide us.” Before the month is out, she said, an assessment should be completed.
FATCA requires FFIs to report information on accounts with balances over US$50,000 held by ‘US persons’. Its aim is to fight tax evasion. The law requires the reporting of information to the IRS and firms which do not comply run the risk of a 30 per cent withholding charge on US-sourced income.
Institutions which are not registered will be considered non-compliant entities and may be subject to the withholding tax of 30 per cent of amounts held in banks in the United States.
By Sunday Business estimates, there are more than 600 local financial entities which might be affected. The FSC oversees 614 financial bodies, the BOJ 14 and the Department of Co-operative Societies supervises over 40 credit unions and other agencies.
Sykes said the bank is now working with the FSC to create a listing of entities which should register.
He said that the work of a technical working group created to ease the process of reporting for local firms was proceeding apace. “We are now following up with the US authorities,” he said.
The technical working group has already completed advanced negotiations with the IRS regarding the signing of a Model 1 Reciprocal IGA, the terms of which have been submitted to Cabinet for approval, the BOJ earlier reported.
In support of the IGA’s requirement for the automatic exchange of tax information, it is intended that a memorandum of understanding (MOU) will be signed between the US and Jamaica’s competent authorities, namely the IRS and Tax Administration Jamaica.
The MOU will stipulate, among other things, the protocols for registration, reporting, compliance and enforcement under FATCA. The working group is in the process of drafting the MOU and hopes to see enactment of local FATCA legislation by May 2014, the BOJ said.
Credit: Jamaica Gleaner