FATCA, or the Foreign Account Tax Compliance Act, began as a US tax-reporting initiative for US residents living overseas, the government of both the Cayman Islands and the BVI having committed to Model 1 Intergovernmental Agreements (IGA) with the United States. US FATCA has given rise to further FATCA type initiatives, including those involving UK tax residents, with the BVI and the Cayman Islands having now each signed an IGA with the UK. The UK IGAs each deal with the automatic sharing of financial information with the UK on UK taxpayers who hold BVI and Cayman Islands bank accounts respectively.
The Cayman Islands and the UK signed the Cayman IGA on 5 November 2013. Steps to establish the legislative and operational framework to implement the IGA are underway and the Cayman Islands government also intends to issue guidance to assist with its implementation. The Premier, The Honourable Alden McLaughlin, said: “Entering into this agreement with the UK builds on our shared history of cooperation in tax and transparency matters; furthermore, it strongly indicates our mutual support for a single, global standard for the automatic exchange of information. While the pace of dialogue has quickened considerably in recent months, the acceptance of automatic exchange as the most effective way to combat tax evasion is the result of decades of global discussion regarding tax transparency.”
Under the IGA, financial institutions in Cayman will report relevant information annually to the Cayman Islands Tax Information Authority who will in turn forward the UK taxpayer information to HMRC in the UK. Similar provisions are in place under the BVI IGA signed between the BVI and the UK on 28 November 2013. The BVI IGA amended the existing 2008 Tax Information Exchange Agreement with the UK to permit the automatic exchange of information and an additional agreement was also signed to improve international tax compliance, setting out the precise details of the information which will be subject to the automatic exchange provisions.
The Premier and Minister of Finance of the BVI, The Honourable Dr. D. Orlando Smith, OBE, commenting on the IGA said: “We are fully committed to playing a leading role in delivering a responsible and effectively regulated global business environment and to tackling the problem of tax evasion as part of a coordinated, balanced and meaningful process. This has been evidenced recently by initiatives such as the BVI’s commitment to the Multilateral Convention on Mutual Administrative Assistance in Tax Matters and our negotiations to complete automatic tax information exchange agreements with both the UK and the United States.”
Premier Smith added “The BVI continues to commit to compliance with international standards of transparency and exchange of information for tax purposes and is supportive of the move towards a single global standard in the automatic exchange of information. The BVI recognises that as a well-established international finance centre it plays an important role in world trade and commerce. That role comes with certain responsibilities and the BVI will continue to be engaged with the UK and relevant international authorities in the global fight against tax evasion and financial crime whilst also ensuring the highest levels of client confidentiality and the proper use of information are fully maintained.”
By Catherine Ross, partner
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