The Caribbean Association of Banks (CAB) calls upon all Caribbean countries, which have not yet done so, to expedite the Intergovernmental Agreement (IGA) process with the Government of the USA, with respect to their obligations under the Foreign Account Tax Compliance Act (FATCA). The CAB recommends that all IGAs should be signed and all relevant regulations/legislation should be in force before December 31, 2016. Failure to do so could result in significant repercussions for Foreign Financial Institutions (FFIs) within these jurisdictions.
FATCA is a law under which financial institutions worldwide are required to report account details of its account holders that are treated as ‘reportable’ to the USA under the regulations. To expedite the implementation of FATCA, the United States negotiated IGAs (Inter Governmental Agreements) with a number of partner jurisdictions.
The IRS recently released an update at the end of July, Announcement 2016-27, with changes that will affect those countries which do not have an IGA in force. According to the Announcement, on January 1st, 2017 the US Treasury will begin updating their IGA list to reevaluate the progress of all jurisdictions that have failed to bring their IGA’s into force.
Each jurisdiction with an IGA that is not yet in force and wishes to continue to be treated as having an IGA in effect must provide to the US Treasury by December 31st, 2016, a detailed explanation of why the IGA is not yet in force and a step-by-step plan (including dates) which they intend to follow to bring the IGA into force. Thereafter, jurisdictions will be given at least 60 days for the US Treasury to assess their status.
FFIs within a jurisdiction that ceases to be treated as if it has an IGA in effect will generally have to enter into an FFI agreement, directly with the US Internal Revenue Service (IRS) in order to comply with their FATCA obligations, unless they qualify for an exemption under the FATCA regulations. Failure to do so, will expose the FFI to a 30% withholding tax on certain US payment transactions. This could result in further costs for the financial institutions and their customers.
Caribbean Countries with IGAs in force, as at August 30th, 2016ii are:
Bahamas Cayman Islands St Kitts and Nevis
Barbados Curacao St Vincent and the Grenadines
British Virgin Islands Jamaica Turks and Caicos Islands
Consequently, the CAB strongly urges all Caribbean countries that are not listed above to ensure that their IGAs are in force before December 31st, 2016.