The Foreign Account Tax Compliance Act (FATCA), which is part of the Hiring Incentives to Restore Employment Act (HIRE), was passed by the United States (US) Congress on 18th March 2010. FATCA was enacted to combat tax evasion by US persons holding assets in non-US financial accounts in non-US jurisdictions. FATCA requires Foreign Financial Institutions (FFIs) to report to the US Internal Revenue Service (IRS), information on accounts valued at US$50,000 or more held by US persons, or by foreign entities in which US persons hold substantial (10% or greater)ownership interest.
FATCA IGA and Annexes:
On 18th August 2015, the Government of Saint Vincent and the Grenadines entered into an Inter-Governmental Agreement (IGA) Model 1B with the US Government to facilitate the automatic reporting of tax information to the IRS. This model 1B IGA, allows for Financial Institutions in Saint Vincent and the Grenadines to report the requisite tax information to the IRS through the Inland Revenue Department, which has been designated as the Competent Authority for the automatic exchange of information in Saint Vincent and the Grenadines.
Annex I and Annex II of the Model 1B IGA provides guidance on the processes to be employed
Financial Institutions are required to report the requisite tax information to the Competent Authority annually on a date to be announced by the Competent Authority.
Individuals with accounts and other assets in Financial Institutions in Saint Vincent and the Grenadines may have their account and asset information reported to the IRS where that individual falls within the category of a US person, and where the account falls within the category of a US Reportable Account under FATCA, after the requisite due diligence procedures have been applied.
For the purposes of FATCA, the term US person means –
- a US citizen;
- a US resident or green card holder;
- a partnership or corporation organized in the US or incorporated under the laws of the US;
- a trust, if said trust is substantially controlled by one or more US persons;
- the estate of a deceased US citizen or US resident or green card holder.
For the purposes of FATCA, the term Financial Institution means –
- a Custodial Institution ie. any Entity that holds, as a substantial part of its business, financial assets for the account of others eg. Trusts or mutual funds;
- a Depository Institution ie. any Entity that accepts deposits in the ordinary course of banking or similar business eg. banks;
- an Investment Entity ie. any Entity that is involved in the business of investing, administering or managing funds on behalf of others and trading securities eg. Hedge funds and private equity funds;
- certain types of Insurance Companies ie. any Entity that is an insurance company (or the holding company of an insurance company) that issues, or is obligated to make payments with respect to a Cash Value Insurance Contract or an Annuity Contract.
The Government of Saint Vincent and the Grenadines has enacted legislation to facilitate compliance by the Financial Institutions with the reporting requirements of FATCA. The Foreign Account Tax Compliance (Implementation and Enforcement of Inter-Governmental Agreement) Act (Act No. 17 of 2015) is a codification of the Model 1B IGA and its accompanying Annexes, and authorizes the Financial Institutions to report the requisite tax information to the IRS. The Legislation also provides for the confidentiality of the information being transmitted and the restriction of the use of such information by the IRS.
The Competent Authority will continue to provide updates on FATCA and will advise financial institutions of the timelines for the submission of reports.