The U.S. Treasury Department announced December 20 that Bermuda, Malta, the Netherlands and three U.K. crown dependencies have joined 12 others working globally to combat tax evasion.
In the space of a week, the six jurisdictions — which include the crown dependencies Jersey, Guernsey and the Isle of Man — signed bilateral agreements with the United States that implement the information reporting and withholding tax provisions commonly known as the Foreign Account Tax Compliance Act (FATCA), a Treasury Department press release said.
It noted that FATCA is rapidly becoming the global standard in the effort to curtail offshore tax evasion.
“FATCA continues to gather momentum as we work with partners worldwide to combat offshore tax evasion,” said Treasury Department Deputy Assistant Secretary for International Tax Affairs Robert B. Stack. “This large number of signings in one week alone sends a strong signal to tax evaders everywhere: International support for FATCA is growing.”
Enacted by the U.S. Congress in 2010, FACTA targets noncompliance by U.S. taxpayers using foreign accounts. With these most recent agreements, the United States has signed 18 FATCA intergovernmental agreements, has 11 agreements in substance and is engaged in related discussions with many other jurisdictions, the Treasury Department said.
FATCA seeks to obtain information on accounts held by U.S. taxpayers in other countries. It requires U.S. financial institutions to withhold a portion of certain payments made to foreign financial institutions (FFIs) who do not agree to report information on U.S. account holders.
Governments have the option of permitting their FFIs to enter into agreements directly with the IRS to comply with FATCA or to implement FATCA by entering into one of two alternative model agreements with the United States.
On December 20, Bermuda signed a Model 2 agreement, meaning that Bermuda will direct FFIs in Bermuda to register with the IRS and report the information required by FATCA about U.S. accounts directly to the IRS. This requirement is supplemented by government-to-government exchange of information regarding certain pre-existing accounts on request.
Malta, the Netherlands and each of the crown dependencies entered into Model 1A agreements. Under these agreements, FFIs will report information about U.S. accounts to their home governments, which will report the information to the IRS. The agreements are reciprocal, meaning that the United States will also provide similar tax information to these governments regarding individuals and entities from their jurisdictions with accounts in the United States.
In addition to these FATCA agreements, protocols to the existing tax information exchange agreements with Jersey, Guernsey and the Isle of Man were also signed.
Updates and further information on FATCA can be found on the Treasury Department’s FATCA page.
The agreements can be found here: