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JBA assessing final rules on FATCA
2013-01-31 14:58:41 | (0 Comments)
The Jamaica Bankers Association (JBA) is assessing the final regulations of the Foreign Account Tax Compliance Act (FATCA) recently released by the United States Treasury and the Internal Revenue Service (IRS) with a view to determining its impact on its members.
At the same time, the JBA indicated that it is banking on the Jamaican government to engage the US authorities in dialogue to establish an intergovernmental agreement, the creation of which would see Jamaica becoming a FATCA partner state.
The JBA, in emailed responses to questions on behalf of President Bruce Bowen, said the Association understood that the government was in the process of discussing the matter with the US authorities.
The JBA said it has received copies of the regulations, but it was too early to say if members were satisfied with modifications made since it was first released a year ago. That is because the 544-page document was released only two weeks ago “and member banks will need time to assess the final provisions after which a formal position will be discussed and agreed,” the JBA said.
The U.S. Congress enacted FATCA in 2010, requiring foreign financial institutions to report to the IRS information about financial accounts held by U.S. taxpayers, or by foreign entities in which U.S. taxpayers hold a substantial ownership interest.
It is ostensibly intended to capture U.S. taxpayers who attempt to evade tax by hiding money in offshore accounts.
The Act requires U.S. agents to subject foreign financial institutions to a 30 per cent withholding tax on income from US financial assets held by those institutions that do not agree to report the requisite information to the IRS.
The same applies to payments to certain nonfinancial foreign entities that do not provide information on their substantial U.S. owners.
The signing of an intergovernmental agreement has been a bone of contention for the JBA, which has, for some time, been urging the government to push for such an arrangement to ease the costs faced by local financial institutions if they are to conform with the regulations.
The Treasury and IRS, in a statement said that since the proposed regulations were published a year ago, the authorities have collaborated with foreign governments to develop two alternative model intergovernmental agreements.
Among other things, the U.S. authorities acknowledged that those models, as articulated by the JBA, reduce burdens on foreign financial institutions.
Under the first model, foreign financial institutions report the information about U.S. accounts to their respective governments who then exchange that information with the IRS.
A partner jurisdiction signing an agreement based on the second model agrees to direct the affected financial institutions to register with the IRS and report the information about U.S. accounts directly to the U.S. agency.
The U.S. authorities have also acknowledged that in many cases, foreign law would prevent financial institutions from reporting directly to the IRS the information required, thus potentially exposing them to withholding.
“Such an outcome would be inconsistent with FATCA’s objective to address offshore tax evasion through increased information reporting,” according to the final regulations.
Hence, the alternative intergovernmental models were developed to overcome domestic legal impediments to compliance, the Treasury and IRS said.
Among other issues, the final regulations phase in the timelines for implementation of the regulations to provide enough time for financial institutions to develop necessary systems.
“In addition, to avoid confusion and unnecessary duplicative procedures, the final regulations align the regulatory timelines with the timelines prescribed in the intergovernmental agreements,” according to a joint Treasury and IRS statement.
The final regulations modify the due date for the first information report by requiring participating financial institutions to file the first information reports with respect to the 2013 and 2014 calendar years not later than March 31, 2015.
In addition, the final regulations reduce the administrative burdens associated with identifying U.S. accounts by calibrating due diligence requirements based on the value and risk profile of the account, and by permitting financial institutions in many cases to rely on information they already collect.
Source: The Gleaner/Power 106 News
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