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Crown dependencies to implement FATCA

Guernsey, Jersey and the Isle of Man are to negotiate partnership agreements with the US to implement the Foreign Account Tax Compliance Act (FATCA) in each of the offshore jurisdictions.

11 October 2012

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The incoming US regime to prevent tax evasion will improve the transparency of tax activities on the islands.

FATCA is designed to force US citizens living overseas to declare their assets in accounts with foreign financial institutions (FFIs). FFIs have to enter into compliance agreements with the US Treasury by 30 June 2013 in order to report on their US clients, or face a withholding penalty equivalent to 30 per cent of the payments to FFIs.

The three governments will negotiate partnership agreements with the US, similar to the one agreed between the US and UK last month (September 2012). They will then have to be ratified by the parliaments of each island before the agreements become part of domestic legislation.

Isle of Man Treasury Minister Eddie Teare said: “Basing FATCA implementation on an intergovernmental agreement is preferred by our industry and I am pleased to confirm our intention to follow this approach with the US government. The simultaneous announcement provides certainty for our business community as they also prepare for FATCA.

“Entering into this type of arrangement highlights and confirms the Isle of Man’s commitments to being a well-regulated jurisdiction which co-operates with other countries on tax matters in accordance with internationally agreed tax standards on transparency and exchange of information.

“I am particularly pleased that the three Crown Dependencies are working together and are taking a common approach on this issue.”

For more on FATCA and its impact on private clients, see www.privateclientadviser.co.uk/feature/financial-planning/global-reach

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Tax & Wealth structuring