US signs tax agreements with Cayman Islands
WASHINGTON (CMC) -- The United States has signed a number of intergovernmental agreements (IGAs) with the Cayman Islands in implementing the Foreign Account Tax Compliance Act (FATCA).
The US Department of the Treasury said that the FATCA was “rapidly becoming the global model for combating offshore tax evasion and promoting transparency”.
US Deputy Assistant Secretary for International Tax Affairs Robert B Stack said the announcement marks a milestone in the effort to promote global tax transparency.
“These agreements underscore growing international cooperation in the effort to end tax evasion everywhere.”
FATCA, enacted in 2010, seeks to obtain information on accounts held by US taxpayers in other countries, the Treasury Department said.
It requires US financial institutions to withhold a portion of payments made to foreign financial institutions (FFIs) that do not agree to identify and report information on US account holders.
FFIs have the option of entering into agreements directly with the IRS, or through one of two alternative Model IGAs signed by their home country.
Signed on Friday, the US Department of Treasury said the Cayman Islands IGA is a Model 1B agreement, meaning that FFIs in the Cayman Islands will be required to report tax information about US account holders directly to the Cayman Islands Tax Information Authority, which is the sole channel in the Cayman Islands for the provision of tax-related information to other governments.
The Cayman Islands Tax Information Authority will in turn relay that information to the IRS, the Treasury Department said.
Additionally, the United States and the Cayman Islands also signed a new Tax Information Exchange Agreement (TIEA), to take the place of the original TIEA signed in 2001.
“By working together to detect, deter, and discourage offshore tax abuses through increased transparency and enhanced reporting, we can help build a stronger, more stable, and accountable global financial system,” said Julie Nutter, Minister-Counsellor for Economic Affairs at the US Embassy in London, who signed on behalf of the United States.
“We look forward to collaborating with the Government of the Cayman Islands to further these objectives,” she added.