BASSETERRE, St. Kitts, Thursday March 27, 2014, CMC – The Eastern Caribbean Currency Union (ECCU) has commenced negotiations with the United States towards executing an inter-governmental agreement (IGA) for the implementation of the US Foreign Account Tax Compliance Act (FATCA), according to an official statement issued here.
The Ministry of Finance said Washington had in 2010 enacted the FATCA to combat tax evasion by US nationals 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 per cent withholding tax levied on withholdable payments and may result in the potential loss of correspondent banking relationships.
The statement by the Ministry of Finance here said that the ECCU member governments have decided to pursue IGA Model 1 which requires financial institutions to submit customer information to the Inland Revenue Department in St. Kitts-Nevis for onward submission to the United States.
It said that the 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 th2 25 April 2014 deadline. Timely registration by the deadline would avoid the imposition of the 30 per cent withholding tax,” the statement noted.
The ECCU comprises Antigua and Barbuda, Dominica, Grenada, St. Lucia, St. Kitts-Nevis, St. Vincent and the Grenadines and Montserrat. Click here to receive free news bulletins via email from Caribbean360. (View sample)