Caribbean News Now!

About Us Contact Us


Jump to your country or territory of interest

Advertise with us

Reach our daily visitors from around the Caribbean and throughout the world. Click here for rates and placements.


Submit news and opinion for publication


Click here to receive our daily regional news headlines by email.


Click here to browse our extensive archives going back to 2004

Also, for the convenience of our readers and the online community generally, we have reproduced the complete Caribbean Net News archives from 2004 to 2010 here.

Climate Change Watch

The Caribbean is especially vulnerable to rising sea levels brought about by global warming. Read the latest news and information here...

Follow Caribbean News Now on Twitter
Connect with Caribbean News Now on Linkedin

News from the Caribbean:

Back To Today's News

FATCA and inter-governmental agreements
Published on March 19, 2013 Email To Friend    Print Version

By Ikins Clarke
Partner (Tax), Deloitte Barbados

BRIDGETOWN, Barbados -- By now most us would have heard and understood the rationale behind the Foreign Account Tax Compliance Act (FATCA). However, for those of us who have paid little attention to world developments since 2010, FATCA is a new chapter in the US Internal Revenue Code introduced in March 2010.

Since its introduction, there have been numerous notices issued by the US Internal Revenue Service (IRS) and, despite some delays, FATCA is here and the final regulations, which were released on 17 January, 2013, detail what needs to be done to comply or suffer the 30 percent withholding consequence of non-compliance.

FATCA will impose certain due diligence and reporting obligations on foreign financial institutions (FFIs). It has left the onus on the FFIs to determine whether any of their clients have US indicia and report on those ultimately determined to be US persons. FFIs are required to enter into an agreement with the IRS to report certain information on their US account holders and their US reportable accounts.

While there was much uncertainty around the draft regulations, which led to industry and country stakeholders submitting myriad comments and suggestions to the IRS, the final regulations outline a streamlined framework for the implementation and operation of FATCA. Indeed, one of the main elements of the final regulations is the facility made available to non-US governments to enter into inter-governmental agreements (IGAs) with the US to remove some of the compliance challenges facing FFIs, including concerns of privacy, data protection and exchange of information laws. IGAs are intended to alleviate such conflicts of law by providing an international framework for the exchange of information which would supersede local law constraints.

There are two models of IGAs (Model 1 and Model 2) and the regulations allow for governments to negotiate for the inclusion of terms and conditions that would not disadvantage FFIs in their country. The old business adage of ‘you don’t get what you deserve, but what you negotiate’ is very applicable in this regard. And while it can be argued that FATCA is prima facie a US regulation being forcefully or subtly enforced on other countries, IGAs can certainly pave the way for FATCA to morph into a global information reporting framework. The IGA could lay the foundation for addressing legal impediments and reducing the burden for FFIs when fulfilling their reporting obligations.

It is likely that non US governments may be excited by the opportunities presented by an emerging global information reporting framework to tackle their own tax avoidance issues. In fact, obtaining information about their own citizens who may be using US financial institutions to avoid local taxes is certainly an inducement to enter an IGA. Moreover, IGAs may likely force FFIs to remain compliant with local statutory regulations.

In September 2012 the first model IGA was signed by the UK and since then, IGAs have been signed with Denmark, Ireland, Mexico and Switzerland. Presently the US is engaging with more than 50 jurisdictions to enter into IGAs; including: France, Germany, Italy, Spain, Japan, Switzerland, Canada, Denmark, Netherlands, Argentina, Korea, and Israel. This rapid development of the IGA framework highlights the fact that the US is not the only jurisdiction concerned with the issue of tax avoidance.

The table below depicts the advantages of the two models of IGAs.


In the Caribbean, there is a sentiment gaining currency that governments have resisted the idea of putting mechanisms in place to deal with the impact of FATCA on the financial institutions under their purview and that they have adopted a “wait and see” attitude. Given the January 1, 2014, timeline for withholding the 30% penalty on non-participating FFIs and recalcitrant US account holders, governments in the region including Barbados and the Eastern Caribbean have been stung into action and have established task forces to access the impact of FATCA and to advise on the prudence of entering into an IGA.

This region will however present a mix of interesting challenges given that we are divided geographically, politically and legislatively. FFIs which operate in various islands across the region will be wary of facing different FATCA reporting requirements in these islands, if respective governments negotiate different model IGAs.

This now begs the question of CARICOM -- Is FATCA a sufficient, if not a necessary, circumstance for the region to present a united approach to the United States? And does the FATCA debate present an opportunity for us to develop a framework for embarking on united endeavours, outside of cricket, that are not undermined by parochial insularity?

It is self-evident that IGAs will allow FFIs to leverage existing anti-money laundering and due diligence processes, but they must be aware that a consistent and robust approach will be needed to successfully adapt, manage, remediate, document and report to satisfy the compliance requirements emanating from FATCA.
Reads: 7073

Click here to receive daily news headlines from Caribbean News Now!



No comments on this topic yet. Be the first one to submit a comment.


As a result of our comments feature being overtaken in recent weeks by spammers using fake email addresses, producing a large number of bounced verification emails each day, we have reluctantly decided to suspend the comments section until further notice.

User comments posted on this website are the sole views and opinions of the comment author and are not representative of Caribbean News Now or its staff. Caribbean News Now accepts no liability and will not be held accountable for user comments.
Caribbean News Now reserves the right to remove, edit or censor any comments. Any content that is considered unsuitable, unlawful or offensive, includes personal details, advertises or promotes products, services or websites or repeats previous comments will not be approved.
Before posting, please refer to our Terms of Use and Privacy Policy.

Other Headlines:

Regional Sports: