Last month US Senator Roger Wicker (R-Miss.) introduced a budget amendment SA 621 to repeal…
U.S. Signs FATCA Pacts with Malta, Netherlands, Bermuda, Jersey, Guernsey and Isle of Man
Last week, the U.S. 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.
Our firm has several clients with accounts in these jurisdictions. We counseled them into the OVDP program and they fortunately and successfully are all in the OVDP program, otherwise the new FATCA agreements would have eventually led to the discovery of their offshore accounts.
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