Member governments of the Eastern Caribbean Currency Union (ECCU) have commenced discussions with the United States of America (US) towards executing an Inter-Governmental Agreement (IGA) for the implementation of the provisions of the US Foreign Account Tax Compliance Act (FATCA).
On 18 March 2010, the US Government enacted FATCA to combat tax evasion by specified US persons holding investments in accounts outside of the United States, specifically as it relates to US-sourced income. FATCA requires Foreign Financial Institutions (FFIs) to report to the US Internal Revenue Service (IRS), information on assets of US$50,000 or more held by US taxpayers, or by foreign entities in which US taxpayers hold substantial ownership interest. Failure of an FFI to submit information could result in a 30% withholding tax levied on withholdable payments and may result in the potential loss of correspondent banking relationships.
ECCU Member Governments have decided to pursue IGA Model 1. This model requires financial institutions to submit customer information to the Inland Revenue Department of the Government of Grenada for onward submission to the IRS. Member Governments have also undertaken to pass the “Foreign Account Tax Compliance (United States) Implementation and Enforcement Bill, 2014”, to provide for the legal submission of customer information for the purposes of FATCA.
In the circumstances all non-bank financial institutions, including off-shore banks, are required to register on the IRS Portal prior to the 25 April 2014 deadline. Timely registration by the deadline would avoid the imposition of the 30.0 per cent withholding tax. This tax is the penalty for non-compliance under REG-121647-10 of the “Regulations Relating to Information Reporting by Foreign Financial Institutions and Withholding on Certain Payments to Foreign Financial Institutions and Other Foreign Entities” issued by the IRS. Withholding commences on 1 July 2014.
Institutions are required to visit FATCA Registration Resources and Support Information where information pertinent to the registration process can be found. It is important that the “IGA Country” option is selected when performing the registration exercise.
Source: Ministry of Finance