Offshore tax havens Guernsey, Jersey and the Isle of Man are working towards an agreement with the US government on FATCA, the incoming regime to prevent tax evasion.
In a move which will improve the transparency of tax activities on the islands, the three governments said they will negotiate partnership agreements with the US, similar to the one agreed between the US and UK last month.
An intergovernmental agreement is expected to be signed soon, following official discussions which have already taken place. This will then have to be ratified by the parliaments of each island before it becomes part of domestic legislation.
FATCA, the Foreign Account Tax Compliance Act, is designed to force US citizens living overseas to declare their assets in accounts with foreign financial institutions (FFIs). FFIs will 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% of the payments to FFIs.
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 today 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.”
The financial sector should welcome the new agreement because it will provide clarity for firms trying to comply with the Act, said Jo Huxtable, a tax partner at Deloitte.
“On a practical level, this statement of intention will be welcomed by businesses in Guernsey, Jersey and Isle of Man because it provides clarity. With the knowledge that the local agreements should closely follow the UK agreement in form, local organisations working towards FATCA compliance can now focus on the practical steps required to become compliant under an intergovernmental agreement.”
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