USA has reached a preliminary agreement with the Cayman Islands for the Caribbean nation to meet FATCA rules. This could act as pressure for other "tax havens" which for the moment have failed to adopt those rules.
The Cayman Islands have said they will comply with FATCA regulations which will come into force in July 2014, and for which the foundations for an intergovernmental agreement (IGA) have been laid, and, as recorded by Reuters, the official signature will be held soon
FATCA requires for foreign financial institutions to notify the U.S. tax authority (IRS) of the accounts held by U.S. citizens with more than $ 50,000. Financial institutions which do not comply will see their benefits in the U.S. undergo tax withholding of 30%, which in fact, in most cases, means evicting them from the country.
The Cayman Islands are a popular destination for registration of investment funds. The country has no income tax and is often referred to as a "tax haven". According to industry sources, the thousands of hedge funds, private equity funds and mutual funds domiciled in Cayman Islands were in favor of reaching an agreement to preserve their access to the U.S. market.
The official signing of the FATCA agreement by Cayman Islands will put pressure on other low-tax countries which harbor investment instruments, such as Luxembourg, Bermuda and the British Virgin Islands. Ireland and Switzerland have already signed agreements with the U.S. for FATCA regulation in January and February this year.
August 19th will see the opening of a webpage for banks to register with the IRS and to ensure their compliance with FATCA. The deadline for registration is until April 25, 2014.