On 8 February 2012, the United States Treasury Department and Internal Revenue Service jointly issued proposed regulations for the next phase of implementing the Foreign Account Tax Compliance Act (FATCA). FATCA, which was enacted by the United States in 2010, aims to strengthen efforts to combat non-compliance by US persons using foreign accounts.
The proposed regulations set out the process through which participating foreign financial institutions (FFIs) will prepare to comply with FATCA in areas such as: entering into an agreement with the IRS; identifying accounts held by US persons; identifying entities in which US persons hold a substantial ownership interest; information reporting; and tax withholding requirements in certain circumstances.
Also on 8 February 2012, France, Germany, Italy, Spain and the United Kingdom jointly issued a statement supportive of the underlying goals of FATCA. This statement made clear that FATCA raised a number of issues; including that FFIs established in these countries may not be able to comply with FATCA’s reporting, withholding and account closure requirements because of domestic legal restrictions.
In order to address such issues and to keep compliance costs for financial institutions as low as possible, the US, France, Germany, Italy, Spain and the UK agreed to explore a common approach to FATCA implementation through domestic reporting and reciprocal automatic exchange, and based on existing bilateral tax treaties.
The Isle of Man Government recognises that businesses in the local financial services sector will be affected by FATCA and wishes to assist those businesses both to comply with FATCA and to reduce compliance costs in the Isle of Man wherever possible. An initial analysis indicates that the inter-governmental partnership approach announced by the US, France, Germany, Italy, Spain and the UK should be explored by the Isle of Man Government. A high-level FATCA working party has already been formed; comprising officers from the Chief Secretary’s Office, Department of Economic Development, the Financial Supervision Commission, the Insurance and Pensions Authority, the Office of the Data Protection Supervisor and The Treasury. Initial contact has already been made with the US Treasury Department and with HM Treasury in the UK. The group will present policy options to the Council of Ministers in due course.
Treasury Minister Eddie Teare, MHK, said,
“FATCA is a piece of legislation likely to have profound implications for global tax co-operation. I am committed to ensuring that we provide the best possible environment for business in the Isle of Man, and how we deal with FATCA as a Government is vital to the business environment.”
He went on to say,
“On FATCA implementation we intend to work closely with the UK on areas of mutual interest and we will look to adopt best practice as it develops. I also feel that we face almost identical issues in relation to FATCA as Guernsey and Jersey, and I have asked the working party to contact and work going forward with their counterparts in the Channel Islands. Finally, I expect to keep businesses in the Isle of Man fully informed of our progress through regular bulletins and dialogue.”