BARBADOS FATCA COMPLIANT IN SUBSTANCE
Chairman of the Special FATCA Negotiating Team, Elson Gaskin, today confirmed that Barbados has met the June 30th deadline for the negotiation and initialling of the Foreign Account Tax Compliance Act (FATCA) Inter-Governmental Agreement (IGA) with the government of the United States of America.
Gaskin explained that Barbados and the USA have settled the text of the relevant documents and Barbados’ name now appears on the US Treasury Department's list of countries that have concluded an IGA in substance. This latest development provides relief for Barbadian financial institutions which feared having to pay a withholding tax on both income and capital for non-compliance with FATCA. As part of the process, the US State Department will confirm that the agreed text is satisfactory before the formal execution of the IGA is done. The State Department review will not, however, affect the FATCA status of Barbados and its financial institutions.
With this phase of the FATCA negotiations completed, the country will turn its attention to completing all matters necessary to operationalize FATCA by September 2015. These said matters include (1) the making of FATCA regulations and (2) the negotiation and execution of a Competent Authority Agreement between the US Internal Revenue Service and the Barbados Revenue Authority.
FATCA was enacted in 2010 by the United States Congress to target non-payment of Federal Taxes by U.S. taxpayers who utilize foreign accounts for this purpose.
Under FATCA, foreign financial institutions (primarily Banks, Insurance Companies and custodial institutions such as Investment Funds) must report to the US Internal Revenue Service (IRS), information about financial accounts held by U.S. taxpayers, or by foreign companies in which U.S. taxpayers hold a controlling interest.
From an operational standpoint, the IGA will require financial institutions in Barbados, to annually collect information on US tax payers who are account holders beginning in 2015 and transmit this information to the Barbados Revenue Authority of Barbados.
The Barbados Revenue Authority will then transmit this information to the IRS.
Thus FATCA should have no effect on Barbadians who are living, maintaining bank accounts and working in Barbados and who are not deemed to be US taxpayers.
June 3, 2014