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ECCU governments open discussions on FATCA compliance
Published on March 27, 2014 Email To Friend    Print Version

BASSETERRE, St Kitts (CUOPM) -- The member governments of the Eastern Caribbean Currency Union (ECCU) have commenced discussions with the United States with a view to executing an inter-governmental agreement (IGA) for the implementation of the provisions of the US Foreign Account Tax Compliance Act (FATCA).

In 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 30.0 percent withholding tax levied on withholdable payments and may result in the potential loss of correspondent banking relationships.

The ECCU member governments have decided to pursue IGA Model 1. This model requires financial institutions to submit customer information to the local government 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 offshore 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 percent withholding tax, the penalty for non-compliance. Withholding commences on 1 July 2014.
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