The U.S. Department of the Treasury announced that the United States has signed intergovernmental agreements (IGAs) with the Cayman Islands and Costa Rica this week to implement the Foreign Account Tax Compliance Act (FATCA).
“Today’s announcement marks a milestone in the effort to promote global tax transparency,” said Deputy Assistant Secretary for International Tax Affairs Robert B. Stack. “These agreements underscore growing international cooperation in the effort to end tax evasion everywhere.”
FATCA, enacted in 2010, seeks to obtain information on accounts held by U.S. taxpayers in other countries. It requires U.S. financial institutions to withhold a portion of payments made to foreign financial institutions (FFIs) that do not agree to identify and report information on U.S. account holders. FFIs have the option of entering into agreements directly with the IRS, or through one of two alternative Model IGAs signed by their home country.
Signed on November 29th, the Cayman Islands IGA is a Model 1B agreement, meaning that FFIs in the Cayman Islands will be required to report tax information about U.S. account holders directly to the Cayman Islands Tax Information Authority, which is the sole channel in the Cayman Islands for the provision of tax-related information to other governments. The Cayman Islands Tax Information Authority will in turn relay that information to the IRS. Additionally, the United States and the Cayman Islands also signed a new Tax Information Exchange Agreement (TIEA), to take the place of the original TIEA signed in 2001.
“By working together to detect, deter, and discourage offshore tax abuses through increased transparency and enhanced reporting, we can help build a stronger, more stable, and accountable global financial system. We look forward to collaborating with the Government of the Cayman Islands to further these objectives,” said Julie Nutter, Minister-Counselor for Economic Affairs at the U.S. Embassy in London, who signed on behalf of the United States.
The Costa Rica IGA was signed on Tuesday, November 26, and is a Model 1A agreement, meaning that the United States will also provide tax information to the Costa Rican government regarding Costa Rican individuals with accounts in the United States.
“Today’s signing marks a significant step forward in our efforts to work collaboratively to combat offshore tax evasion – an objective that mutually benefits both our countries,” said Gonzalo R. Gallegos, Chargé d’Affaires of the U.S. Embassy in Costa Rica, who signed on behalf of the United States.
In addition to the 12 FATCA IGAs that have been signed to date, Treasury has also reached 16 agreements in substance and is engaged in related conversations with many more jurisdictions.
For the signed Costa Rica IGA, click here.
For the signed Cayman Islands IGA, click here.