Guyana and the United States have concluded “in substance” an intergovernmental agreement (IGA) for implementation of the US Foreign Account Tax Compliance Act (FATCA).
FATCA was enacted by the US in March 2010 as a mechanism designed to reduce the level of tax evasion which currently exists. It seeks to ensure that United States persons disclose their overseas investments and pay applicable taxes on US sourced income invested overseas.
The Government Information Agency (GINA) reported that Minister of Finance Dr Ashni Singh made the announcement yesterday and Guyana is now listed by the US Department of the Treasury as one of the jurisdictions treated as having an intergovernmental agreement in effect.
The US Department of the Treasury and the IRS announced in April that jurisdictions that have reached agreements in substance with the US on the terms of intergovernmental agreements under the FATCA can be treated as having agreements in effect until the end of 2014.
“The conclusion of the agreement, in substance, comes after several months of review and negotiation between the US and Guyana authorities on the text of the agreement, and will see the two countries concluding a Model 1 reciprocal agreement within the coming months,” GINA reported.
It noted that FATCA provisions of the Hiring Incentives to Restore Employment Act of 2010 (HIRE Act) were enacted in the US on March 18, 2010, in order to address concerns over offshore tax evasion. FATCA generally requires a foreign financial institution (FFI) to enter into an agreement with the Internal Revenue Service (IRS) to report information about certain accounts held by the US, persons or foreign entities owned by US persons.
An FFI that does not enter into an agreement with the IRS will be subject to a 30 percent withholding tax on certain payments, including US source interest and dividends, and gross proceeds from sales of US securities.
Congress enacted FATCA to target non-compliance by US taxpayers using foreign accounts. It requires US financial institutions to withhold a portion of certain payments made to FFIs that do not agree to identify and report information on US account holders. Governments have two options for complying with FATCA: they can either permit their FFIs to enter into agreements with the IRS or they can, themselves, enter into IGAs with the US, GINA noted.
“In Guyana’s case, the latter option was adopted, and an intergovernmental agreement has been entered into with the US,” GINA reported. “Minister Singh indicated that as of June 24, 2014, Guyana attained the status of having an agreement in substance. This development represents a significant achievement in cooperation between Guyana and the US,” GINA said.
Singh applauded the efforts made by both countries to ensure timely advancement of the discussions.
The Minister further indicated that Guyana’s authorities will continue to collaborate with their US counterparts through the final signing of the agreement and into its implementation, GINA reported.
In June, Republic Bank (Guyana) Ltd announced that it will shortly be communicating with its customers in Guyana who are expected to be affected by the provisions of the US legislation.
A source told Stabroek Business that Republic Bank’s disclosure essentially means that the entire banking community “which has been consulting collectively on the FATCA issue” has agreed to comply with the FATCA requirements.
