Becoming FATCA compliant

The Foreign Account Tax Compliance Act (FATCA) was enacted in 2010 by the United States Government with a view to reducing tax evasion by citizens.residents and other US persons who are holders of foreign accounts. The FATCA legislation requires that once US persons hold financial assets exceeding a value of US$50,000, this must be reported to the US Internal Revenue Service (IRS).

Back in August when the T&T Government signed the Intergovernmental Agreement (IGA) associated with FATCA, it signaled a commitment to finalising all arrangements to begin reporting to the IRS. However, a three-fifths majority is required for the passage of this critical piece of legislation. In other words.for the Bill to be enacted, it needs the support of the Opposition.

Last week, the Government tabled an amended Bill which appropriately addressed issues raised by the Opposition, regarding confidentiality and the protection of the privacy of clients. The amendments also outlined that procedural matters supporting the exchange of information be left within the remit of the Board of Inland Revenue.

Under FATCA, Foreign Financial Institutions such as banks in TT, are required to identify and report on financial accounts held by US taxpayers or by foreign entities in which they – the US persons - hold a significant ownership interest. If the information is not provided.the bank would withhold a tax of 30 percent on US source payments the client receives, and send it to the IRS in the United States. Banks that do not comply would also be subject to a similar imposition of a 30 percent withholding tax on US source payments that they receive.

Of course, banks are not the only entities that stand to lose; noncompliance will undoubtedly cause damaging effects to the average bank client, business clients and to the national economy as a whole.

Trinidad and Tobago is the financial services hub of the English-speaking Caribbean and the United States remains our largest trading partner. Thousands of citizens continue to visit and work in the US on a regular basis with that country being a major source of remittances for many who reside here in TT. The serious implications of failure to enact the legislation should not be underestimated.

In the absence of legislation, TT stands to be blacklisted and the relationship with correspondent financial institutions will be severely affected, preventing clients from conducting transactions such as wire transfers, currency transactions and remittance services.

The effects of this will ripple through the economy, thereby increasing the cost of doing business and lowering profit margins. The result would be an unwarranted yet avoidable systemic challenge to an economy already burdened by harsh recessionary conditions.

Debate on the Bill is set to resume on January 6, 2017 and the TT Chamber stands in solidarity with ATTIC, Bankers Association and Joint Chambers.demanding a resolution as early as possible in order to meet the February 2017 deadline.

It is the express desire of all business groups that our leaders put country first and do what needs to be done now with respect to FATCA.