On March 18, 2010, the United States Government enacted the Foreign Account Tax Compliance Act (FATCA) to fight tax evasion by US persons holding investments in accounts outside of the United States of America. Subjected to this law are any person with US indicia but excluding a corporation and any member of the same affiliated group, a real estate investment trust, the United States of America or any wholly owned agency, and a US tax exempt organisation.
By the new law, Foreign Financial Institutions (FFIs) will have to report to the US Internal Revenue Service, information on assets exceeding US $50, 000 being held by US Tax payers, on cash value insurance (that is long-term insurance) and annuity contracts held by individual account holders in excess of US $250,000, or by foreign entities in which US tax payers hold more than 10 percent ownership interest. If the FFI fails to submit this information it could result in:
• A 30 percent withholding tax levied on certain payments; and
• Loss of correspondent banking relationships with US Banks.
To avoid a direct reporting arrangement between the US Internal Revenue Service and financial institutions operating in Saint Lucia, Prime Minister and Minister for Finance, Economic Affairs, Planning and Social Security, Hon. Dr. Kenny D. Anthony, today, November 19, 2015 signed an Inter-Governmental Agreement (The Agreement) with the United States of America, represented by Ms. Linda Swartz Taglialatela, Ambassador Designate of the United States of America to Saint Lucia, for facilitating this information exchange. Fortunately, Saint Lucia was able to sign a Model IA (a reciprocal agreement) which will cause the US authorities to exchange such information about Saint Lucia persons directly to our Competent Authority, the Inland Revenue Department.
Government will introduce shortly in Parliament a Bill giving legal force to the provisions of the Agreement and the first exchange of reportable information by the foreign financial institutions in respect of 2014 and 2015 will be submitted by September 30, 2016.
Further information about the Inter-Governmental Agreement may be sourced from the Financial Services Regulatory Authority and the Inland Revenue Department, Waterfront, Castries, Saint Lucia.