Cayman, US sign FATCA pact

The Cayman Islands and the United States signed an agreement last week that will be the basis for the automatic exchange of tax information under the U.S. Foreign Account Tax Compliance Act.  

FATCA is a U.S. tax-reporting initiative that forces financial institutions and certain nonfinancial entities worldwide to report bank accounts and ownership interests of U.S. taxpayers or face a 30 percent withholding tax on transactions with the United States.  

The now signed FATCA Model 1 intergovernmental agreement ensures that entities in Cayman report this information to the Cayman Islands government rather than send it directly to the Internal Revenue Service. The government will collect and transfer the records to the IRS.  

Intergovernmental agreements were made necessary as an afterthought because the extraterritorial application of the U.S. law interfered with certain data privacy and confidentiality laws outside the United States.  

The two governments also signed a new tax information exchange agreement, which replaces the original TIEA signed in 2001. The new TIEA stipulates the legal channels through which information will be automatically exchanged.  

Minister of Financial Services Wayne Panton signed the agreements in London, following the U.K.’s Joint Ministerial Council of Overseas Territories meeting last month. Julie Nutter, minister-counselor for economic affairs in the U.S. Embassy in London, signed the agreement on behalf of the U.S.  

“By working together to detect, deter and discourage offshore tax abuses through increased transparency and enhanced reporting, we can help build a stronger, more stable, and accountable global financial system,” Ms Nutter said. “We look forward to collaborating with the government of the Cayman Islands to further these objectives.”  

 

Support of financial services industry  

Minister Panton acknowledged the support of Cayman’s financial services industry in deciding that a Model 1 IGA was the best option for government to pursue. The second option for a FATCA IGA, known as Model 2, would have required financial institutions to report directly to the IRS.  

“With a Model 1 IGA, government’s Tax Information Authority will implement the standardized data-reporting framework for FATCA,” he said. “This should help to defray administrative costs for financial institutions.” 

Minister Panton said the benefits of the agreement for Cayman’s economy are clear. “Our participation in globally accepted transparency and tax information exchange initiatives speaks volumes of our financial services integrity, and that leads to the confidence and trust that investors continue to have in us.” 

He also noted that the FATCA Model 1 IGA is poised to become the global standard for multilateral automatic exchange of tax information. “Signing these agreements clearly demonstrates that both Cayman and the U.S. are committed to the stability and growth of global financial services, which contributes to stability in our country’s economies and increased opportunities for our people,” he said. 

Gonzalo Jalles, CEO of industry group Cayman Finance, noted that FATCA requires financial institutions to register with the U.S. Treasury and, in accordance with the IGA, agree to report certain information about their account holders.  

The U.S. Treasury is expected to open a registry portal in January 2014. 

“Industry is pleased that government consulted them on which IGA to pursue, and that our recommendation for a Model 1 was accepted,” Mr. Jalles said. “We look forward to seeing the final IGA, as industry continues to prepare for the FATCA implementation process.” 

As part of that process, Mr Jalles said that Cayman Finance, in collaboration with the Ministry of Financial Services, has organized a full day’s seminar in January to cover the registration process in detail, along with other international taxation topics. Furthermore, Minister Panton said that government is setting up a working group to handle the detailed legislative framework and implementation matters. 

 

Other agreements signed in November  

In addition to U.S. FATCA, Cayman signed a FATCA-type agreement with the U.K. on Nov. 5. This implements a reporting mechanism to automatically share with the U.K. financial information on U.K. taxpayers who hold Cayman Islands accounts. 

Cayman also signed tax information exchange agreements with Malta and Poland on Nov. 25 and Nov. 29, respectively.  

Mr Panton said TIEAs are “much more than signatures and handshakes.” Tax information exchange “is a vital cog in the application of globally accepted standards,” he stated. 

“These agreements are implemented by competent authorities who understand the legal nuances and importance of cooperating in the fight against illegal activity such as tax evasion and money laundering. Without them, criminals would continue to drain public coffers, and deprive both developed and developing countries of economic opportunities.”  

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Attending the signing were, from left, Cayman’s London office director and its U.K. representative, Lord Blencathra; Cayman’s minister of financial services Wayne Panton; the U.S. Embassy in London’s minister-counselor for economic affairs, Julie Nutter; Premier Alden McLaughlin and Cayman’s deputy representative in the U.K., Charles Parchment.

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The Cayman Islands and the US signed a FATCA Model 1 intergovernmental agreement, and a new tax information exchange agreement, on 29 November in London. Signing on behalf of their governments are the US Embassy in London’s Minister-Counselor for Economic Affairs Julie Nutter and Cayman’s Minister of Financial Services Wayne Panton.
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1 COMMENT

  1. What a disgrace that Cayman gave in to this US treasury con job. FATCA is not only a overreach but immoral as it imposes too much strain on innocent US indicias who legally reside in there country of choice. Does not surprise me that the US government will grab at any money they can get without regard to ethics and morals. Thats exactly what FATCA is. As this goes forward I pray there will be countries that stand up to this US BS that will do little to beef up the coffers of the treasury. FATCA may come online as a regulation but will fail in its implementation as nearly every US indicia will clam up and starve the treasury
    of any potential income. FATCA will cost billions with so little in return any worthwhile tax reform would have to get rid of it. FATCA will be a failed experiment.

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