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Caribbean Gets More Time To Comply With US Offshore Tax Law

WASHINGTON, D.C., CMC – The United States has given the Caribbean more time to comply with its offshore tax law.

The US Department of the Treasury and the Internal Revenue Service said  that “due to overwhelming interest from countries around the world, a six-month extension to the start of the Foreign Account Tax Compliance Act (FATCA) withholding and account due diligence requirements will be provided to allow more time to complete agreements with foreign jurisdictions”.

The Treasury Department said the six-month extension, to July 1, 2014, will also provide Caribbean and other foreign financial institutions (FFIs) with “the time necessary to comply with FATCA while helping to ensure efficient implementation of the law.

“Given the groundswell of international interest in FATCA, we are providing an additional six months to complete agreements with countries and jurisdictions across the globe, before withholding begins,” said Treasury Deputy Assistant Secretary for International Tax Affairs, Robert B. Stack, in a statement.

“The high volume of international participation in this effort represents a quintessential race to the top,” he said.

“Every additional country we bring on board means we are one step closer to winning the fight against offshore tax evasion.”

Enacted by the US Congress in 2010, FATCA targets non-compliance by US taxpayers using foreign accounts and “establishes a global approach to combating offshore tax evasion,” the Treasury Department said.

The FATCA requires US financial institutions to withhold a portion of payments made to FFIs who do not agree to identify and report information on US account holders.

To make compliance with the reporting requirements of FATCA feasible, particularly for FFIs in jurisdictions where existing laws prohibit this type of reporting, the US Treasury Department said it has developed intergovernmental agreements (IGAs) that rely on governmental cooperation to facilitate the exchange of FATCA information.

“This approach not only addresses legal impediments that exist in some foreign countries but also reduces burdens on financial institutions and streamlines the reporting process,” it said.

It said the approach has been praised by the Paris-based Organization for Economic Co-Operation and Development (OECD), the Group of Eight (G-8) of the world’s industrialized powers, and many others within the global community, “who are now actively considering making FATCA IGAs the basis for an international standard for the automatic exchange of this type of tax information.

“Stopping offshore tax evasion is a global issue and the IGAs are a crucial component to FATCA implementation,” the Treasury Department said.

To date, the department said it has signed nine IGAs, and is engaged in related conversations with more than 80 other jurisdictions. It did not identify them.

The Treasury Department said while the start of withholding and due diligence will be extended to July 1, 2014, the first report of information under FATCA continues to be due in 2015, and will include information about accounts maintained during 2014.

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