Wednesday, 2 July 2014

Agreement on FATCA reached

Grenada has reached an agreement with the United States on the terms of an Inter-Governmental Agreement under the Foreign Account Tax Compliance Act (FATCA) that requires financial institutions in Grenada to report to the US Internal Revenue Service (IRS), information on assets of US$50 000 or more held by US taxpayers, or by foreign entities in which US taxpayers hold substantial ownership interest.

On March 18, 2010, the US Government enacted FATCA to combat tax evasion by specified US citizens holding investments in accounts outside of the United States, specifically as it relates to US-sourced income.

On June 16, 2014, Grenada successfully completed the negotia-tion of a Model 1 Inter-Government Agreement to enable FATCA compliance. This model requires financial institutions to submit customer information to the Inland Revenue Department for onward submission to the IRS.

A statement from the Ministry of Finance said that Grenada intends to have legislators approve the Foreign Account Tax Compliance (United States) Implementation and Enforcement Bill, to provide for the legal submission of customer information for the purposes of FATCA.

The statement said that failure of a Foreign Financial Institution (FFI) to submit information could result in a 30 per cent withholding tax levied on specific income originating from sources in the US and may result in the potential loss of correspondent banking relationships. “As such, Government is committed to ensuring that the required structures are in place to facilitate the requirements of FATCA while preventing the imposition of the withholding tax on the local financial institutions,” the Government release added. (LS)

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