Caribbean Association of Banks pushing for full regional compliance with FATCA
With several regional banking institutions yet to put in place Inter Governmental Agreements (IGAs) with the United States on that country’s Foreign Account Tax Compliance Act (FATCA), the Caribbean Association of Banks is again urging Caribbean countries to enact the necessary legislation for the implementation of FATCA. The CAB said in a release last week that “failure to do so has far-reaching implications for banks in terms of an increase in sovereign risk and its impact on their ability to conduct business.”
The CAB said in its release that where countries in the region do not have IGAs in force with the USA, domestic financial institutions in those territories will have to establish individual agreements with the US government at significant costs, which may have to be passed on to their customers.
Where banks fail to comply with the Act, they become liable for a 30 per cent withholding tax on any payment of interest, dividends, rents, royalties, salaries, wages, annuities, licensing fees and other income, gains and profits, if such payment is from sources within the United States. Additionally, gross proceeds from the disposal of property in the US that can produce interest or dividends and certain foreign pass-through payments will also be liable to the 30 per cent withholding tax.
In October last year, Guyana and the US signed an IGA for the exchange of information under FATCA. The agreement was signed by Guyana’s Minister of Finance Winston Jordan and US Ambassador to Guyana Perry Holloway and alluded to by Jordan as a step in the cooperation between Guyana and the US to combat money laundering and tax evasion and avoidance.
The other countries listed by the CAB as having IGA are the Bahamas, Cayman Islands, St Lucia, Barbados, Curacao, St Vincent and the Grenadines, Bermuda, Jamaica, Turks and Caicos Islands, British Virgin Islands and St Kitts and Nevis.
“The CAB strongly encourages the remaining Caribbean countries to ensure that their IGAs are in force by their extended deadlines in order to avoid the negative consequences of non-compliance with FATCA,” the release said.
The CAB is a community of banks and other financial institutions in the Caribbean which proactively influences issues impacting the financial services sector through advocacy, education and networking.