PRESS RELEASE – For the last few years financial institutions have been preparing for the new reporting requirements for United States clients which form part of the Foreign Account Tax Compliance Act (FATCA).
The act is intended to increase transparency for the Internal Revenue Service (IRS) with respect to U.S. persons that may be investing and earning income through non-U.S. institutions.
As of July 1st 2014 financial institutions in Saint Lucia and the rest of the Eastern Caribbean Currency Union (ECCU) member countries, now classed as Foreign Financial Institutions or FFIs, are required to adopt new account opening procedures in order to comply with FATCA rules.
The Bankers Association of Saint Lucia (BASL) announced that local FFIs have for several months been preparing and training employees for the changes and Saint Lucia’s finance sector is ready to comply by the deadline date. Individual institutions have also issued notifications and information about the new rules to customers.
The BASL understands, however, that educating the public will be an ongoing exercise and encourages all financial institutions to ensure that employees and clients understand the new regulations and also encourages the public to comply and be co-operative during the process.
The Association noted that the ECCU Member Governments have adopted the IGA Model 1 which requires financial institutions to submit all FATCA-related information to their respective Inland Revenue Department for onward submission to the IRS.
According to FATCA, financial institutions must provide all information on assets of US$50,000 or more held by U.S. taxpayers, or by foreign entities in which U.S. taxpayers hold substantial ownership interest.
Failure of an FFI to submit information could result in a 30 percent withholding tax levied on withholdable payments and may result in the potential loss of critical correspondent banking relationships and this would affect customers’ ability to transact with the USA, our main trading partner.
The services that would be cost affected would be wire transfers, drafts and other payment mechanisms if banks can no longer clear these transactions through U.S. banks.
The BASL reminds the public that FATCA does not replace the existing U.S. tax withholding and reporting regimes. It does, however, add additional requirements and complexity to the existing regimes. The IRS expressed its intent to eliminate duplicative reporting and withholdings where possible.
The attributes which cause an individual or business to be classified as a U.S. person include: U.S. citizenship; Being a lawful resident of the U.S. and/or; U.S. corporations, U.S. partnerships/ U.S. estates/ U.S. trusts where the U.S. exercises primary supervision over administration or where one or more U.S. persons has the authority to control all substantial decisions.
The Association notes that the impact of FATCA is far reaching and impacts any person, U.S. or foreign, to the extent that such person is involved in making or receiving payments that fall within the scope of FATCA.
The Bankers Association of Saint Lucia reiterates the commitment of Saint Lucia’s financial institutions to ensuring regional compliance with FATCA and calls on the public to assist financial partners in that regard. The BASL encourages all clients and prospective clients to visit or call their respective branches for further clarity or details on this issue if they are affected by this new US legislation.