Bilateral agreements set to give overall shape to FATCA
The final shape of Fatca will be determined by bi-lateral agreements arrived at between the US and other countries around the world, as part of a pragmatic decision by the US authorities to make the new rules workable.
This week, the governments of Guernsey, Jersey and the Isle of Man jointly announced their intention to negotiate their own individual agreements with the US authorities over the implementation of the upcoming US Foreign Account Tax Compliance Act (FATCA).
The agreements are expected to be in the form of a bi-lateral agreement with the US, similar to the ‘Model I’ agreement signed between the UK and the US on 12 September 2012.
Guernsey’s Chief Minister, Peter Harwood (pictured), said: “Basing FATCA implementation on an intergovernmental agreement is preferred by the industry in all three Crown Dependencies. We are pleased to confirm our joint intention to follow this approach with the US Government. This announcement provides certainty for our business community as they also prepare for FATCA.
Harwood added: “Entering into this type of arrangement highlights the cooperative approach of the Crown Dependencies to international tax matters, and confirms Guernsey’s commitment to being a well-regulated, internationally co-operative tax transparent jurisdiction. I am particularly pleased that the three Crown Dependencies have worked together and adopted a common position on this issue.”
Fiona Le Poidevin, chief executive of Guernsey Finance, the promotional agency for the island’s finance industry, said: “The financial services industry in Guernsey has been busy getting up to speed with FATCA. This announcement will be very well received by industry because it provides certainty for the future. That said, there is still much work to be done by those firms in preparation for FATCA and we will also have to wait to see the final form of the agreement, which is reached between Guernsey and the US.”
“Certain US taxpayers holding specified foreign financial assets with an aggregate value exceeding $50,000 will report information about those assets on new Form 8938, which must be attached to the taxpayer’s annual income tax return. Higher asset thresholds apply to US taxpayers who file a joint tax return or who reside abroad.”
FATCA requires certain US citizens to disclose overseas holdings of more than $50,000 in value directly to the US Internal Revenue Service, and it requires foreign financial institutions to disclose data to the IRS automatically.
In September, the UK became the first country to finalize a tax information-sharing pact with the United States under FATCA. Under the terms of this agreement, the data is collected and forwarded to the US by the UK authorities, rather than directly to the IRS, as the US legislators had originally stipulated.