Readers will be aware that on 30 June 2014 the Government of the BVI signed a Model 1(b) intergovernmental agreement (“IGA”) with the United States to implement the US Foreign Account Tax Compliance Act (“FATCA”). As result, the BVI committed itself to improving international tax compliance and reducing the possibility of US tax evasion by US persons who invest in non-US accounts and non-US vehicles.
The primary aim of FATCA is to require foreign entities to identify and report specified information to the US Inland Revenue Service (“IRS”) about US tax payers with foreign accounts and assets. Foreign entities which fail to comply with FATCA could be subject to a 30% withholding on US sourced payments.
Pursuant to the IGA, BVI financial institutions (“FIs”) are required to report directly to the BVI International Tax Authority (“ITA”). The ITA will then forward that information to the IRS on an annual basis.
Readers are reminded that in April of this year the ITA launched its online reporting system – the BVI Financial Account Reporting System (“BVIFARS”) – by which FIs were required to report any information under the IGA. The deadline to enrol with BVIFARS had been extended from 1 June 2015 to 30 June 2015 and FIs which are not exempt from registration were required to obtain a Global Intermediary Identification Number (“GIIN”) from the IRS to be able to complete their enrolment. FIs are not obliged to file Nil reports and hence enrolment with the BVIFARS is not required by the ITA if there is nothing to report.
Relevant FI’s successfully enrolled with BVIFARS needed to ensure that they submitted their filings for the year 2014 by 31 July 2015 to avoid enforcement action in the BVI.
Cayman Islands FATCA deadlines passed
The Cayman Islands Government (“CIG”) and the US entered into an intergovernmental agreement similar to that of the BVI IGA. Both governments also entered into a new Tax Information Exchange Agreement (“TIEA”), to take the place of the original TIEA signed in 2001. These agreements paved the way for automatic exchange of information (“AEOI”) under FATCA.
The Cayman Islands Department for International Tax Cooperation (“TIA”) launched its AEIO online portal for automatic exchange of tax information on 19 March 2015. To avoid enforcement measures on TIA’s part, all Cayman FIs with reporting obligations were required to register with TIA by 29 May 2015. This deadline has been extended twice in line with TIA’s soft approach to enforcement during the first year of FATCA compliance.
Consequently, once registration with AEIO portal has been completed, the deadline for the relevant FIs to submit their reports for the period 1 July to 31 December 2014 was extended to 26 June 2015, which has now passed. Similar to the BVI, nil returns are not required to be filed.
Having done it twice before, it is now unlikely that the TIA will extend the above deadlines again, however, FIs that comply with their notification and reporting obligations imminently are unlikely to face adverse consequences and enforcement measures. TIA continues to work with industry members to assist them in meeting the compliance requirements and adopts a less stringent stance during the first year of FATCA regime.