WASHINGTON D.C., United States, Thursday April 3, 2014, CMC – The United States Department of the Treasury and the Internal Revenue Service (IRS) have announced that jurisdictions that have reached agreements in substance with the US on the terms of intergovernmental agreements (IGAs) under the Foreign Account Tax Compliance Act (FATCA) can be treated as having agreements in effect until the end of 2014.
Both departments said on Wednesday that this “treatment” will be available to jurisdictions that reach agreements in substance before July 1, 2014, and consent to having the status of their agreements disclosed.
As an increasing number of jurisdictions reach agreements in substance, the Treasury Department said the announcement provides foreign financial institutions (FFIs) located in these jurisdictions with the guidance they need prior to the upcoming registration deadlines.
In addition, as part of the effort to facilitate an effective start of FATCA withholding on July 1, 2014, it said this announcement also provides FFIs with 10 more days to register and ensure that they will be included on the first IRS FFI list.
It said the IRS can provide this extra time based on its assessment of the performance of its registration system to date.
The Treasury Department said the United States has so far signed 26 IGAs; and that, as of Wednesday 19 additional jurisdictions will be treated as having IGAs, in effect bringing the total number to 45.
The department said this list is expected to continue to grow in the coming weeks as additional countries give consent to having the status of their IGAs disclosed and additional agreements in substance are reached.
“With 45 countries now considered to have IGAs in effect, and more jurisdictions far along in the process, the robust international support behind FATCA is undeniable,” said Deputy Assistant Secretary for International Tax Affairs Robert B. Stack.
The US Congress enacted FATCA in 2010 to target non-compliance by US taxpayers using foreign accounts.
Stack said the provision has since become the “global standard for promoting tax transparency.”
It requires US financial institutions to withhold a portion of certain payments made to FFIs that do not agree to identify and report information on US account holders.
The Treasury Department said governments have two options for complying with FATCA: they can either permit their FFIs to enter into agreements with the IRS, or they can themselves enter into IGAs with the United States.
The final regulations generally provide that, in order for withholding not to apply, withholding agents must verify the status of FFIs beginning on July 1, 2014, the Treasury Department said.
It said this announcement allows jurisdictions that have reached agreements in substance on IGAs before July 1, 2014, and have consented to be included on the list, to be treated as having IGAs in effect until December 31, 2014.
It also allows FFIs to register on the FATCA registration website consistent with that treatment.
After December 31, 2014, only signed IGAs will be considered to be in effect, the Treasury Department said.
By treating jurisdictions that have reached agreements in substance on the terms of IGAs as jurisdictions that have IGAs in effect, the notice provides FFIs in those jurisdictions with certainty about their FATCA responsibilities this year.
Prior to this notice, the Treasury Department said FFIs were required to register by April 25, to ensure that they would be included on the first IRS FFI list.
This is the only list that will be published before withholding begins.
“Today’s announcement provides the assurance that FFIs will be included on this list if they submit a complete registration form by May 5, 2014, instead of April 25 as originally announced,” the Treasury Department said.
The Cayman Islands is among jurisdictions that have signed Model 1 intergovernmental agreements (IGA) with the US, and Bermuda has signed Model 2 IGA.
The Treasury Department said the British Virgin Islands and Jamaica have reached agreements in substance and have consented to being included on the Model 1 IGA list. Click here to receive free news bulletins via email from Caribbean360. (View sample)