FATCA: US - BVI Inter-Governmental Agreement
The BVI has initialled an Inter-Governmental Agreement (IGA) with the US which will lead to the signing and implementation of the US Foreign Account Tax Compliance Act (FATCA) in the BVI.
During productive discussions with the US, the BVI was able to agree certain exceptions that will be applicable to non-profit organisations and pension plans. Further, Foreign Financial Institutions (FFI) located in the BVI, to which FACTA applies, are able to comply with their reporting obligations through a streamlined procedure and thus reduce the burden of compliance on those FFI’s.
The IGA requires the reporting of certain information by FFI’s to the BVI International Tax Authority on US account holders. The information is then automatically exchanged with the US authorities.
The originating FATCA text is complex, and is still evolving as interpretations are issued. It is expected that there will be obligations for FFIs to register directly with the IRS. The scope of the definition of FFIs in the BVI-US IGA will affect the registration obligations.
In summary FATCA requires foreign banks, insurers and investment funds to send the US Internal Revenue Service information about Americans' offshore accounts worth more than $50,000.
Foreign businesses, including trusts, companies, and partnerships that do not comply can be effectively frozen out of U.S. capital markets because of a 30 percent withholding tax on their income from the United States, even if there are no US citizen beneficial owners.
We expect the BVI authorities to implement the legal and administrative procedures, including the publication of guidance notes, to facilitate the new procedures envisaged under the IGA in the near future. It is anticipated that FATCA will come into force on the 1st July 2014.
The IGA is seen as part of the BVI’s commitment to global standards on transparency with the BVI Government discussing the proposals with the relevant stakeholders to ensure the interests of clients and business partners were taken into account in the agreement. The BVI Premier was reported as stating that the BVI is “...a willing partner with well-developed systems and laws to facilitate exchange of information for regulatory, law enforcement and tax purposes.”
The initialling of this IGA with the US adds to the similar agreement with the UK, the Multi-Lateral Convention on Mutual Administrative Assistance in Tax Matters and 25 other Information Exchange Agreements, all of which confirms the Territory’s commitment to global tax transparency and cooperation.
For further information we refer you to our news item entitled “US FATCA, UK FATCA, G5 Exchange of Information Forum” to be found at:
http://www.rosemont-int.com/news/05-12-2013-us-fatca-uk-fatca-g5-exchange-of-information-forum/