Barbados will be seeking to get some financial institutions exempt from the provisions of the Foreign Account Tax Compliant Act (FATCA), which is expected to become fully operational by September, 2015.
This was disclosed this week by Minister of International Business, Commerce and Trade Donville Inniss, who told a media briefing that a team was set up to commence negotiations of an inter-governmental agreement (IGA) between Barbados and the United States.
“The Government of Barbados will negotiate with the US to ensure that institutions like credit unions, pension funds, Government entities and international institutions that present a low risk of US tax evasion are exempt from the provisions of FATCA under a special annex to the IGA,” said Inniss.
Outlining reasons for the intended exemption, Elson Gaskin, bank secretary of the Central Bank of Barbados, explained that unless the account was over a certain amount, then it would not be reported.
“Institutions such as our credit unions are deemed to present a very low risk of US tax evasion,” said Gaskin.
“We don’t expect to find many US taxpayers in our credit unions. In fact, there is a threshold. Once you don’t come up to two per cent of your account holders, disclosing what is called US indicia, you will be exempt from registering under FATCA. But what you would simply do is, those persons who are US taxpayers, if they meet the account threshold that information would be reported to the Inland Revenue
who would then transmit it to the IRS,” explained Gaskin.
The number or percentage of American taxpayers holding accounts in credit unions in Barbados is not yet known. Gaskin said the financial institutions were in the process of gathering that information. The number is not yet known for other bank accounts as yet either.
The threshold for bank accounts is US$50,000 on aggregate.
“So if you are a US taxpayer and you have an aggregate total of BDS$100,000 in a bank account on July 31, you will be subject to FATCA reporting, or if you have an insurance contract with a cash surrender value of at least $500,000 you will also be subjected to reporting. If you are under those thresholds those amounts don’t have to be reported,” said Gaskin.
The Inland Revenue Department will be responsible for transmitting the information to the IRS on American taxpayers who are account holders here.
Sabina Walcott-Denny, commissioner of the Inland Revenue said the department would need “more resources to do this efficiently”, adding that the cost of the exercise “will have to be negotiated”.
“The regular cost according to the agreement, will be borne by Barbados. However, the extraordinary cost, we should be able to negotiate something on that,” she said.