Interesting Robert Wood post from Robert Wood about FATCA. Comments include interesting discussion about citizenship-based taxation.
Now, the U.S. scores another pair of big wins by signing Intergovernmental Agreements (IGAs) with the Cayman Islands and Costa Rica. FATCA was quietly enacted in 2010 in a big messy bill called the Hiring Incentives to Restore Employment Act of 2010 (P.L. 111-147). Today, FATCA is the centerpiece of U.S. efforts to curb tax evasion everywhere.
Some FFIs report to the IRS voluntarily, some via agreements. An Intergovernmental Agreement can allow a bank or other FFI to report to its own government on Americans. The foreign government can then report to the IRS.
Foreign banks can use this avenue so they do not need to report directly to the IRS. But like it or not, report they must, and there is little sign they will refuse. The IRS can be expected to take advantage of the expanded web of global reporting.
FATCA collects 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. Almost no FFI wants to be in that position.
The Cayman Islands IGA here is a Model 1B agreement. That means FFIs in the Cayman Islands must report tax information about U.S. account holders to the Cayman Islands Tax Information Authority. That agency acts as the sole channel in the Cayman Islands for the provision of tax-related information to other governments.
In turn, the Cayman Islands Tax Information Authority then relays the information to the IRS. But the win for the U.S. didn’t end there. The two countries also signed a new Tax Information Exchange Agreement (TIEA), to take the place of the original one signed in 2001.
The Costa Rica IGA here is a Model 1A agreement. That means the United States will also provide tax information to the Costa Rican government regarding Costa Rican individuals with accounts in the United States. It’s a kind of reciprocity.
- Forget About Stashing Your Cash in the Cayman Islands (economicpolicyjournal.com)
- Cayman Islands agrees to report US citizens’ offshore assets under controversial law (fromthetrenchesworldreport.com)
- Cayman Islands, Costa Rica sign tax pacts with U.S. (theglobeandmail.com)
- Cayman Islands, Costa Rica sign tax pacts with U.S. (uk.reuters.com)
- #FATCA update from Germany from todundsteuer (renounceuscitizenship.wordpress.com)
- Good interview about #Americansabroad renouncing U.S. citizenship – Linked to #FATCA (renounceuscitizenship.wordpress.com)
- Citizenship and the freedom of travel from and travel to other countries (renounceuscitizenship.wordpress.com)