Jersey Reviewing FATCA Impact
The Jersey government has published an initial response to the release of further details by the US tax authority and Treasury on the US Foreign Account Tax Compliance Act, which will impact Jersey's financial services industry.
“As we have known for some time, these new regulations will have an impact on companies operating within Jersey's finance industry,” Jersey Finance, the jurisdiction's promotional body for the finance industry, said in a statement. “Jersey Finance is fully engaged at both industry and government level, including a specific FATCA Working Party in order to support members in dealing with the introduction of FATCA.”
“The FATCA provisions are in the form of guidance, which make it clear that the US has taken into account representations from foreign governments, of which Jersey was one, in seeking to minimize the reporting burden," the statement continues. "It is important to note that, not all financial institutions in Jersey will be engaging in activities that are affected by FATCA, or if they are some to only a rather limited extent.”
“The FATCA provisions will apply to all jurisdictions - they are not directed at centres such as Jersey alone - and so they should not adversely affect Jersey’s competitive position," Jersey Finance adds.
FATCA was enacted by the US in March 2010 and is intended to ensure that the US tax authorities obtain information on financial accounts held by US taxpayers at foreign financial institutions (FFIs). Failure by an FFI to disclose information would result in a requirement to withhold 30% tax on certain US-connected payments to non-participating FFIs and account holders who are unwilling to provide the required information.
A participating FFI will have to enter into an agreement with the US Internal Revenue Service to provide the name, address and taxpayer identification number (TIN) of each account holder who is a specified US person; and, in the case of any account holder which is a US-owned foreign entity, the name, address, and TIN of each substantial US owner of such entity. The account number is also required to be provided, together with the account balance or value, and the gross receipts and gross withdrawals or payments from the account.
A notice issued by the US Treasury and the IRS now provides a timeline for FFIs and US withholding agents to implement the various requirements of FATCA. Specifically, an FFI must enter an agreement with the IRS by June 30, 2013, to ensure that it will be identified as a participating FFI in sufficient time to allow withholding agents to refrain from withholding beginning on January 1, 2014.
Withholding on US source dividends and interest paid to non-participating FFIs will begin on January 1, 2014, and will be fully phased in on January 1, 2015. Due diligence requirements for identifying new and pre-existing US accounts (including certain high-risk accounts, including private banking accounts with a balance that is equal to or greater than USD500,000) will begin in 2013, and reporting requirements will begin in 2014.
“Jersey enjoys an excellent relationship with the US, and in fact the first TIEA that Jersey signed in 2002 was with the US," Jersey Finance states. "Jersey also has a Statement of Co-operation between the Jersey Financial Services Commission and the four United States financial regulators (Board of Governors of the Federal Reserve System, Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation and the Office of Thrift Supervision) to formalize existing arrangements for cooperation and information sharing.”
"A substantial amount of information has been released and we are now working to fully analyze the content of the draft regulations in order to provide further updates and specific guidance to member firms,” Jersey Finance concludes.