CAB urges governments to sign IGA’s with America
With regards to the US Foreign Account Tax Compliance Act (FATCA); the Caribbean Association of Banks (CAB) has strongly urged governments in the region, who have yet to complete the process towards a signed Intergovernmental Agreement (IGA) with the USA to do so prior to 31 December, 2014.
FATCA was enacted by the USA to target non-compliance by U.S. taxpayers using foreign accounts. FATCA requires Foreign Financial Institutions (FFI’s) to report to the Internal Revenue Service (IRS) information about financial accounts held by U.S. taxpayers, or by foreign entities in which U.S. taxpayers hold a substantial ownership interest.
The impact of FATCA is far reaching and affects any person, US or foreign, who is involved in making or receiving payments that fall within the scope of FATCA. Failure to comply with FATCA could result in a 30 per cent withholding tax levied on withholdable payments. CAB emphasised that it may also result in the potential loss of correspondent banking relationships for banks, which are critical to facilitate business transactions with the USA.
CAB has stressed that IGA’s will make it easier for partner countries to comply with the provisions of FATCA. Under an IGA, FFI’s in partner jurisdictions will be able to report directly to a local competent authority; who in turn will report to the IRS.
The latest IRS Announcement has stated that after 31 December, 2014, countries who have not signed an IGA will be treated as jurisdictions with an “IGA in effect “ provided that they demonstrate “firm resolve” to sign the intended IGA as soon as possible. The US Treasury will review the list of jurisdictions having an agreement in substance (but not yet signed), on a monthly basis, to assess whether any of the jurisdictions should be removed from this list.
Caribbean countries affected by this announcement include Anguilla, Antigua and Barbuda, Dominica, Grenada, Guyana, Haiti, Montserrat, St Kitts and Nevis, St Lucia, St Vincent and the Grenadines and Trinidad and Tobago.
A complete list of the jurisdictions currently being treated as having an “IGA in effect”, but which were previously required to sign by December 31, 2014, can be found here: http://www.treasury.gov/
