Guyana and US reach agreement in substance on FATCA – Finance Minister
Minister of Finance Dr. Ashni Singh today announced that the Government of Guyana has, in substance, concluded with the Government of the United States of America an intergovernmental agreement for implementation of the U.S. Foreign Account Tax Compliance Act (FATCA).
As a result of the achievement of this important milestone, Guyana is now listed by the U.S. Department of the Treasury as one of the jurisdictions treated as having an intergovernmental agreement in effect.
The conclusion of the agreement, in substance, comes after several months of review and negotiation between the US and Guyana authorities on the text of the agreement, and will see the two countries concluding a Model 1 reciprocal agreement within the coming months.
FATCA provisions of the Hiring Incentives to Restore Employment Act of 2010 (HIRE Act) were enacted in the U.S. on March18, 2010, in order to address concerns over offshore tax evasion. FATCA generally requires a foreign financial institution (FFI) to enter into an agreement with the Internal Revenue Service (IRS) to report information about certain accounts held by the US, persons or foreign entities owned by US persons. An FFI that does not enter into an agreement with the IRS will be subject to a 30 percent withholding tax on certain payments, including US source interest and dividends, and gross proceeds from sales of US securities.
Congress enacted FATCA to target non-compliance by US taxpayers using foreign accounts, and the provision has since become the global standard for promoting tax transparency. It requires U.S. financial institutions to withhold a portion of certain payments made to FFIs that do not agree to identify and report information on US account holders. Governments have two options for complying with FATCA: they can either permit their FFIs to enter into agreements with the IRS or they can, themselves, enter into IGAs with the US.
In Guyana’s case, the latter option was adopted, and an intergovernmental agreement has been entered into with the US. On April 4, 2014, the U.S. Department of the Treasury and the IRS announced that jurisdictions that have reached agreements in substance with the US on the terms of intergovernmental agreements under the FATCA can be treated as having agreements in effect until the end of 2014.
Minister Singh indicated that, as of June 24, 2014, Guyana attained the status of having an agreement in substance. This development represents a significant achievement in cooperation between Guyana and the US.
Minister Singh applauded the efforts made by both countries to ensure timely advancement of the discussions. The Minister further indicated that Guyana’s authorities will continue to collaborate with their US counterparts through the final signing of the agreement and into its implementation.