Cayman tourism association reviewing new US tax regulations

The Cayman Islands Tourism Association is offering its members some tips in dealing with a newly-enacted United States tax regulation that has caused some local businesses to run afoul of US Internal Revenue Service requirements.  

A number of Cayman Islands merchants who accept American Express credit cards are now required to submit their US tax status to credit card providers and other payment processors.  

Section 6050W of the US Internal Revenue Code requires merchant acquiring entities in the US, like American Express, to document the status of any American or foreign business they settle transactions with.  

“Some of our Caribbean partners, like CHTA and Bahamas Hotel and Tourism Association met with American Express to seek resolutions to challenges facing the industry as a result of the IRS requirement,” said CITA Executive Director Jane van der Bol in a statement to members sent last week.  

Some hotels in the Bahamas noted cash flow issues arising from the US tax requirement last week, according to reports in the American press.  

The merchant businesses that failed to provide the information before 31 December, 2012, are subject to a 28 per cent US federal backup withholding tax on their payments. Under the law, payment processors have to withhold the tax and transfer it to the US Internal Revenue Service. 

Although section 6050W of the US tax code is aimed at American taxpayers, who have to provide their taxpayer identification number, foreign merchants using the payment services are subject to the regulation if their establishment has a physical address or bank account in the US, or if it processes transactions in US dollars, as it is the case with credit cards.  

To comply with the regulation, Cayman businesses that accept US credit cards have to complete US tax form W-8BEN to certify their status as a non-US merchant and submit it to their payment processing provider. Not all Cayman Islands merchants have determined yet whether any withholding tax has been deducted from the American Express payments. 

Ms van der Bol offered the following assistance tips to CITA members:  

A 1-800 number has been established to facilitate filing of forms and support inquiries. The number to contact is 1-800-297-2639, and press “option 1”. You can also send an e-mail to [email protected] with information about where and when you can be contacted;  

Information is available at www.americanexpress.com/confirm; 

Members are asked to contact merchant account representatives regarding filing requirements for other US credit cards such as MasterCard, Visa and Discover. 

0
0

NO COMMENTS