Mediaboss Marketing

27 February 2012

The Isle of Man government has announced that it may work with a number of other countries in order to help reduce the compliance burden of the United States Foreign Account Tax Compliance Act (FATCA) on the jurisdiction's financial services industry.

Responding to the incoming rules, the Isle of Man government has said that it wishes to assist businesses both to comply with FATCA and reduce compliance costs where possible. The government said an initial analysis had indicated that the inter-governmental partnership approach announced by several European governments and the US should be explored by the Isle of Man government.

The government said a high-level FATCA working party has already been formed, comprising of officers from the Chief Secretary's Office, the Department of Economic Development, the Financial Services Commission, the Insurance and Pensions Authority, the Office of the Data Protection Supervisor and the Treasury. The government further announced that initial contact has been made with the US and UK Treasury on the matter.

Manx Treasury Minister Eddie Teare, said: ?FATCA is a piece of legislation likely to have profound implications for global tax co-operation. I am committed to ensuring that we provide the best possible environment for business in the Isle of Man, and how we deal with FATCA as a government is vital to the business environment.?

He added: ?On FATCA implementation we intend to work closely with the UK on areas of mutual interest and we will look to adopt best practice as it develops. I also feel that we face almost identical issues in relation to FATCA as Guernsey and Jersey, and I have asked the working party to contact and work going forward with their counterparts in the Channel Islands. Finally, I expect to keep businesses in the Isle of Man fully informed of our progress through regular bulletins and dialogue.?

FATCA was enacted by the US in March 2010 and is intended to ensure that the US tax authorities obtain information on financial accounts held by US taxpayers at foreign financial institutions (FFIs). Failure by an FFI to disclose information would result in a requirement to withhold 30% tax on certain US-connected payments to non-participating FFIs and account holders who are unwilling to provide the required information.

A participating FFI will have to enter into an agreement with the US Internal Revenue Service to provide the name, address and taxpayer identification number (TIN) of each account holder who is a specified US person; and, in the case of any account holder which is a US-owned foreign entity, the name, address, and TIN of each substantial US owner of such entity. The account number is also required to be provided, together with the account balance or value, and the gross receipts and gross withdrawals or payments from the account.

A notice issued by the US Treasury and the IRS now provides a timeline for FFIs and US withholding agents to implement the various requirements of FATCA. Specifically, an FFI must enter an agreement with the IRS by June 30, 2013, to ensure that it will be identified as a participating FFI in sufficient time to allow withholding agents to refrain from withholding beginning on January 1, 2014.

Withholding on US source dividends and interest paid to non-participating FFIs will begin on January 1, 2014, and will be fully phased in on January 1, 2015. Due diligence requirements for identifying new and pre-existing US accounts (including certain high-risk accounts, including private banking accounts with a balance that is equal to or greater than USD500,000) will begin in 2013, and reporting requirements will begin in 2014.

In a statement responding to the US government's announcement of February 8, 2012, France, Germany, Italy, Spain and the United Kingdom jointly issued a statement in support of the underlying goals of FATCA. The five nations agreed, in order to mitigate compliance costs for financial institutions, that they would explore a common approach to FATCA implementation through domestic reporting and reciprocal automatic exchange of information, based on existing bilateral tax treaties.

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IoM Mulls FATCA Implications