U.S. Signs FATCA Pacts with Malta, Netherlands, Bermuda, Jersey, Guernsey and Isle of Man
By Michael Cohn From Accounting Today
The U.S. has signed six more intergovernmental agreements with a half dozen jurisdictions, including several traditional offshore tax havens, to implement the Foreign Account Tax Compliance Act, or FATCA.
Over the past week, the U.S. Treasury Department has signed intergovernmental agreements to implement FATCA with Malta, the Netherlands, the Islands of Bermuda, and three United Kingdom Crown Dependencies: Jersey, Guernsey and the Isle of Man.
FATCA was included as part of the HIRE Act of 2010 in an effort to combat offshore tax evasion. It requires foreign financial institutions to report on the holdings of U.S. taxpayers to the Internal Revenue Service or face heavy penalties. The law has sparked controversy abroad, with foreign banks and U.S. expatriates and dual citizens pointing to violations of other countries’ banking secrecy laws and violations of financial confidentiality. In an effort to address such concerns, the Treasury Department and the IRS have been signing intergovernmental agreements with other countries, while delaying some
With the most recent agreements, the U.S. has signed 18 FATCA intergovernmental agreements, has 11 agreements in substance, and is engaged in related discussions with many other jurisdictions, according to the Treasury Department.
“FATCA continues to gather momentum as we work with partners worldwide to combat offshore tax evasion,” said Deputy Assistant Secretary for International Tax Affairs Robert B. Stack in a statement Thursday. “This large number of signings in one week alone sends a strong signal to tax evaders everywhere: international support for FATCA is growing.”
FATCA seeks to obtain information on accounts held by U.S. taxpayers in other countries. It requires U.S. financial institutions to withhold a portion of certain payments made to foreign financial institutions who do not agree to identify and report information on U.S. account holders. Governments have the option of permitting their FFIs to enter into agreements directly with the IRS to comply with FATCA under U.S. Treasury Regulations or to implement FATCA by entering into one of two alternative Model IGAs with the United States.
On Thursday, Bermuda signed a Model 2 agreement, meaning that Bermuda will direct and legally enable FFIs in Bermuda to register with the IRS and report the information required by FATCA about consenting U.S. accounts directly to the IRS. This requirement is supplemented by government-to-government exchange of information regarding certain pre-existing non-consenting accounts on request.
Malta, the Netherlands, and each of the Crown Dependencies that signed this week entered into Model 1A agreements. Under these agreements, FFIs will report the information required under FATCA about U.S. accounts to their home governments, which in turn will report the information to the IRS. These agreements are reciprocal, meaning that the United States will also provide similar tax information to these governments regarding individuals and entities from their jurisdictions with accounts in the United States.
In addition to these FATCA agreements, protocols to the existing tax information exchange agreements with Jersey, Guernsey, and the Isle of Man were also signed. Updates and further information on FATCA can be found by visiting the Treasury FATCA page here.
The IRS has also been updating information recently on FATCA. On Wednesday, the IRS posted the FATCA FFI List Resources and Support Information Web page to its FATCA Web site. In addition, the FATCA FFI List Frequently Asked Questions (FAQs) have been posted to the same IRS FATCA Web site.
The IRS also released Announcement 2014-1 last Friday, providing an update on FATCA financial institution registration information, to remind financial institutions creating accounts and entering registration information on the IRS FATCA registration Web site about certain steps that they will need to take on or after Jan. 1, 2014. The announcement also provides general information concerning the anticipated publication dates of final qualified intermediary, withholding foreign partnership and withholding foreign trust agreements.
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FATCA deal signed: US denies Big Brother tactics
By Raymond Hainey The Royal Gazette
Bermuda’s top US diplomat yesterday denied America was using Big Brother tactics to clamp down on tax dodgers.
US Consul General Robert Settje said that the Foreign Account Tax Compliance Act (FATCA) treaty signed with Bermuda — which requires annual reporting of US citizens’ bank accounts on the Island to the US tax collector — was aimed at addressing international concerns on tax fraud.
Mr Settje said: “The world at large is concerned about tax evasion in general and our partners are well aware of that issue and willing to cooperate with us.
“There are some who might view it as being intrusive but because it is at a government to government level and each government that decides whether it’s willing to go along with the decision has determined it’s not so intrusive they shouldn’t go forward.”
The treaty signing brings the Island in line with a US law designed to obtain information on accounts held by US taxpayers in other countries.
It binds foreign financial institutions to identify and annually report key information about US account holders to the US Internal Revenue Service (IRS).
Institutions outside the US that fail to comply with treaty obligations will become subject to a 30 percent withholding tax on certain US source payments like interest payments.
Bermuda has chosen to have financial institutions on the Island to report direct to the IRS, rather than through the Bermuda Government.
Finance Minister Bob Richards, who signed the agreement on behalf of Government, said: “We are a tiny island and when our neighbour next to us asks us something we are already committed to provide — tax transparency — we do. What FATCA does is standardise the way it’s done and automates it.”
“We have got to do what we have to do to remain in business for our Bermudian people and to remain competitive in the global marketplace.
“Most of our business comes from the United States so our relationship with them is critical — more critical than with any other country.
Earlier, Mr Richards said the new agreement built on existing tax information exchange agreements and the mutual legal assistance treaty already in force between the two countries, as well as the 1986 tax agreement which helped to kick-start Bermuda’s role as a major offshore jurisdiction and tourism centre.
He stressed: “It’s every country’s sovereign right to design or adjust its tax collecting system. Bermuda’s responsibility as a responsible and respected international financial centre in the global financial system is to respect that right — just as we expect others to respect our tax system, a system that is over 100 years old.”
And he added: “This historic agreement builds upon a rich history of cooperation and friendship Bermuda has had with the United States from the beginning.”
Mr Settje said that the agreement did not reflect US concerns over Bermuda’s financial and regulatory affairs.
He added: “Clearly, Bermuda is what we might refer to as a low-tax jurisdiction, a different tax jurisdiction. But we in the US understand Bermuda is not a tax haven in the sense that is normally used.”
And Mr Settje said that similar agreements had been signed with several other countries, including the UK, Switzerland and Spain — some of them bilateral.
And he added: “In no way is it meant to ride roughshod over the rights of other nations.”
The Association of Bermuda Insurers and Reinsurers (ABIR) was happy with the agreement.
“I would like to applaud both the governments of Bermuda and the United States for working together to improve international tax compliance and ultimately strengthen the economies of both nations,” said ABIR president Bradley Kading. “As the largest supplier of catastrophe reinsurance to US insurers, Bermuda has a strong relationship with the United States that has only been reinforced through this agreement.”
He added that over the last 12 years alone, Bermuda’s insurers and reinsurers have contributed an estimated $35 billion in catastrophe claims payments to their US clients.
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http://www.royalgazette.com/article/20131220/BUSINESS/131229992
