Bahamas signs FATCA IGA
The Bahamian government yesterday took a “critical step” in complying with the Foreign Account Tax Compliance Act (FATCA) by signing an intergovernmental agreement (IGA) with the U.S.
During a press conference held at the Ministry of Financial Services, Minister of Financial Services Ryan Pinder stated that industry consultation represents the next phase of achieving total compliance.
“We believe that, cooperatively, The Bahamas and the United States may have negotiated the most progressive intergovernmental agreement that exists today,” said Pinder.
The Model One IGA effectively replaces The Bahamas’ previous “agreement in effect” under FATCA, which was set to expire by the end of 2014.
FATCA, which was originally enacted in March 2010, will eventually require local financial institutions to disclose information regarding any offshore accounts and investments held by U.S. persons abroad.
Under FATCA, the U.S. government can impose a 30 percent penalty withholding tax on withholdable payments made to foreign financial institutions that fail to comply with FATCA’s disclosure requirements.
Pinder acknowledged The Bahamas’ strict financial data privacy laws, but said that the country’s FATCA-compliant legislation is “substantially complete” and would be released for industry consultation by today.
Pinder aims to table the legislation for first reading when Parliament reconvenes on November 19.
While the minister felt that local institutions are “fairly well prepared” for FATCA, he added that the Ministry of Financial Services would release guidance notes within the next week.
The Bahamas will begin reporting to the U.S. government by September 2015.
However, other FATCA obligations are slated for early 2015, with Pinder noting that certain steps need to be put in place by the end of this calendar year.
Pinder suggested that the initial expense of the collection and reporting infrastructure would be approximately $3 million.
“The final step is the building of the infrastructure for the government to be able to collect and report the [tax] data. That is at the final stages as well,” said Pinder, noting that the recommendation to government on the winner bidder of the earlier request for proposal process is before Cabinet.
U.S. Chargé d’Affaires Lisa Johnson praised the efforts of both countries in signing the agreement, stating that combating offshore tax evasion is an objective that “mutually benefited” both countries.
“This agreement is yet one further example of the deep and substantial links that positively bind the U.S. and Bahamian economies.
“[Through] increased transparency and enhanced reporting, we hope to build a stronger, more stable and more accountable global financial system,” said Johnson.
