We originally posted Cayman Banks to Disclose US Taxpayer's Information to the IRS! on September 18, 2013,where we discussed that the Cayman Islands, known as a haven for wealthy Americans seeking to stash cash overseas without scrutiny from the U.S. government, is about to become less secret. The FATCA agreement with the Cayman Islands was initially agreed to in August and it was signed
The U.S. Department of the Treasury announced that the United States has signed intergovernmental agreements (IGAs) with the Cayman Islands and Costa Rica during the week of November 25, 2013 to implement the Foreign Account Tax Compliance Act (FATCA). FATCA is rapidly becoming the global model for combating offshore tax evasion and promoting transparency.
"Today's announcement marks a milestone in the effort to promote global tax transparency," said Deputy Assistant Secretary for International Tax Affairs Robert B. Stack. "These agreements underscore growing international cooperation in the effort to end tax evasion everywhere."
This agreement with the Cayman's is significant since the island nation of 53,000 people has no income tax and is one of the world's most popular destinations for investment funds to organize for tax purposes.
Signed November 29, 2013, the Cayman Islands IGA is a Model 1B agreement, meaning that FFIs in the Cayman Islands will be required to report tax information about U.S. 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 agreement follows a similar pact signed by the Cayman Islands and the United Kingdom earlier in November, 2013.
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.
The Costa Rica IGA was signed on Tuesday, November 26, and is a Model 1A agreement, meaning that the United States will also provide tax information to the Costa Rican government regarding Costa Rican individuals with accounts in the United States.
"Today's signing marks a significant step forward in our efforts to work collaboratively to combat offshore tax evasion – an objective that mutually benefits both our countries," said Gonzalo R. Gallegos, Chargé d'Affaires of the U.S. Embassy in Costa Rica, who signed on behalf of the United States.
In addition to the 12 FATCA IGAs that have been signed to date, Treasury has also reached
16 agreements in substance and is engaged in related conversations with many more jurisdictions.
The United States and Panama are in talks on a tax evasion agreement. The United States does not have a full tax treaty with Panama, which has been listed in recent years by global authorities as a tax haven. But the United States and Panama did sign a tax-information exchange agreement in 2010.
The United States is Panama's largest trading partner. The Panamanian government said on Sept 18, 2013, on its website that it is working on a draft proposal for a FATCA deal, which it hopes to finish as soon as possible.
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Read more at: Tax Times blog