Barbados agrees to enter FATCA talks

By added on 18/02/2014

International Business Minister, Donville Inniss recently announced that the Barbados Government and the United States of America have agreed to start negotiations with respect to an Inter-Governmental Agreement (IGA) that will give effect in Barbados to the provisions of the Foreign Account Tax Compliance Act (FATCA), reports Tax News.

FATCA, enacted by the US Congress in 2010 and taking effect on July 1, 2014, is intended to ensure that the US obtains information on accounts held abroad at foreign financial institutions (FFIs) by US persons. Failure by an FFI to disclose information on their US clients, including account ownership, balances and amounts moving in and out of the accounts, will result in a requirement to withhold 30 percent tax on payments of US-sourced income.

"The Government of Barbados established a Negotiating Team headed by the Central Bank of Barbados and Invest Barbados comprising both private and public sector representatives, to advise on the most efficacious way to proceed. This Task Force conducted research, held meetings with stakeholders and had dialogue with officials of the US Treasury Department. In the end the Task Force advised Cabinet that Barbados should seek to negotiate a reciprocal IGA with the US Government," the Minister disclosed.

Pointing out that Barbados is not alone in relation to FATCA, Mr Inniss stated: "To date, 16 countries have signed IGAs with the United States while several more are in negotiations to do so."

The Minister said that the IGA would require financial institutions in Barbados to annually collect information on US tax payers holding accounts in the island beginning in 2015 and transmit this information to the Inland Revenue Department of Barbados.

The Inland Revenue Department will then transmit this information to the IRS. Therefore, FATCA should have no effect on Barbadians who are living, maintaining bank accounts and working in the country and who are not deemed to be US taxpayers.