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. An agreement between the countries will put in place the Foreign Account Tax Compliance Act, or FATCA. The 2010 law makes it tougher to hide money overseas because foreign banks must report their accounts to the U.S. Internal Revenue Service or face, in some cases, a 30 percent withholding tax.
The accord is significant because the Cayman Islands is a major financial center and home to operations for dozens of banks, funds and wealth-management entities, according to Bloomberg BNA.
Among major banks that do business in the Cayman Islands are:
* the Royal Bank of Canada, * HSBC Holdings Plc (HSBA),
* Bank of Nova Scotia,
* Bank of America Corp.,
* Deutsche Bank AG, UBS AG, and
* CIBC FirstCaribbean International Bank.
* CIBC FirstCaribbean International Bank.
Switzerland and the U.S. signed an intergovernmental agreement in February to comply with FATCA. Separately, the U.S. and Swiss governments are negotiating the terms of handing over data about former U.S. clients suspected of tax evasion.
The agreement with the Caymans is another sign that U.S. taxpayers’ accounts are increasingly subject to government scrutiny on multiple fronts. Several other Caribbean jurisdictions with significant financial industries, such as Bermuda and the Bahamas, are among the dozens of countries having discussions about similar accords.
So-called intergovernmental agreements, or IGAs, similar to the one announced last week allow banks to share the information with their own governments, which then pass the data on to the IRS. Denise Hintzke, global FATCA leader for Deloitte Tax LLP, said “We are moving toward more global information exchange,” in an Aug. 15 interview. The Caymans accord “is the first step toward being able to do that.” What’s more, the Cayman Islands is entering into a “Model 1” FATCA agreement, she said.
“They are going to step into the role of getting information directly from their financial institutions.”
“It means that they’re taking on the responsibility of FATCA guidance and regulations and they will take responsibility for enforcing the requirements of the law,” she said.
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Source:
Read more at: Tax Times blog
