Guyana’s decision to comply with the US Foreign Account Tax Compliance Act (FATCA) in July of last year is currently awaiting the signing of an inter-governmental agreement for formal implementation.
Minister of Finance Dr Ashni Singh told Stabroek News that Guyana and the United States Government have reached an understanding on the technical agreement and that the signing will be a formality. He said that there were two categories of compliance, but that since both Guyana and the US had agreed Guyana was placed on the list of compliant countries.
FATCA was enacted by the US in March 2010 as a mechanism designed to reduce the level of tax evasion which currently exists among holders of foreign accounts. It seeks to ensure that United States persons disclose their overseas accounts and pay applicable taxes on US sourced income invested overseas.
Since July, Guyana has been listed by the US Department of the Treasury as one of the jurisdictions treated as having an intergovernmental agreement in effect.
The US Department of the Treasury and the IRS announced in April that jurisdictions that have reached agreements in substance with the US on the terms of intergovernmental agreements under the FATCA can be treated as having agreements in effect until the end of 2014.
Stabroek News understands that since then this has been extended. For all intents and purposes however all commercial banks in Guyana are enforcing the FATCA.
FATCA provisions of the Hiring Incentives to Restore Employment Act of 2010 (HIRE Act) were enacted in the US on March 18, 2010, in order to address concerns over offshore tax evasion. FATCA generally requires a foreign financial institution (FFI) to enter into an agreement with the US Internal Revenue Service (IRS) to report information about certain accounts held by the US, persons or foreign entities owned by US persons.
An FFI that does not enter into an agreement with the IRS will be subject to a 30 percent withholding tax on certain payments, including US source interest and dividends, and gross proceeds from sales of US securities.
Congress enacted FATCA to target non-compliance by US taxpayers using foreign accounts. 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. 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 US, GINA noted in July.
In November last year Barbados signed an inter-government agreement with the US.
“The signature of this FATCA agreement represents one of the salient pillars in the transformation of how we as an international business and financial services centre interact not only with other jurisdictions on the sharing of vital information, but is an indication of the transformation of how we interact with our clients and apply greater due diligence in an ever-changing environment,” Minister of Industry, International Business, Commerce and Small Business Development, Donville Inniss stated.
US Ambassador Dr Larry Palmer welcomed Barbados’ commitment to intensifying its cooperation with the US to improve international tax compliance, and hailed the signing as “a significant step forward in efforts to work collaboratively to combat offshore tax evasion”.
“The FATCA introduces reporting requirements for foreign financial institutions with respect to certain accounts held by US taxpayers. Because access to information from other countries is critically important to the full and fair enforcement of domestic tax laws, information exchange is a top priority for the United States”, he said.