Local financial institutions are said to be lagging behind in terms of implementing common reporting standards (CRS) specified by the Organization for Economic Cooperation and Development (OECD).
Barbados signed onto the CRS, which covers 96 jurisdictions, in October of 2015 and domestic institutions now have until the end of July this year to complete their 2017 reporting.
However, during a recent discussion on the new legislation hosted by the Society of Trust and Estate Practitioners (STEP) at the Barbados Yacht Club, it was revealed by a show of hands that the majority of companies who deal with the high net worth individuals and entities, had not even started to examine their client base to see if they qualified for such scrutiny.
Latanya Edwards, a tax specialist with Ernst and Young, who called into the discussion from New York, explained that the aim of the CRS was to “stop tax evasion at its most basic level by allowing objective third parties to identify relevant taxpayers and relevant income so their home jurisdiction can determine what it is and whether it should be taxed”.
Imran Ali, an international tax expert with PricewaterhouseCoopers (PwC) who joined the Barbados office late last year, also said financial institutions were required to “identify high and low value accounts for both individuals and entities.
“A high value individual is one who has US$1 million, and a high value entity is valued at US$250,000. Financial institutions were given a time frame to do an internal review of these accounts, determine the jurisdictions where the clients originate and thereby, where these funds should go for tax purposes. The deadline for the internal review for high value individual accounts was December 31, 2017, while that for high value entities is December 31, 2018,” Ali said.
He also emphasized the need for companies to submit their 2017 reports by July 31 this year.
“You can appoint an agent to carry this out for you, but the ultimate authority remains with the financial institution. The rules also state that even if you do not have any reportable accounts, you should write to the ministry and let them know,” he said.
His colleague, Javier LaMonde, PwC’s regional senior manager in tax and legal services, said: “We understand there will be some practical implementation challenges, so we recommend that you develop systems to review your existing customer base and introduce new procedures to identify reportable accounts.
“The OECD has a standardized form of reporting in place, and it would be best to follow it, and even if you make some errors the first time around, still submit the report.”
Ali also outlined some of the penalties companies would face if they did not comply with the regulations.
“If you do not submit or keep records, or you submit false report or you are negligent with your reporting, there is a fine of $50,000 and/or ten years in prison. There are also pecuniary liabilities that can be imposed by authorities, like a $10,000 fine when you do not abide by the reporting standards laid out in your local legislation.
“Also, if you have not filed your reports with the national reporting authority, in this case the Barbados Revenue Authority (BRA), within 14 days after the deadline has passed, you can be fined $1,000 for every day it remains outstanding.”
Among the financial institutions not required to sign onto the CRS are the Central Bank of Barbados, the Caribbean Development Bank, Enterprise Growth Fund Limited, the Barbados Agency for Micro Enterprise Development and credit unions.
However, BRA is responsible for sending any information gathered from the financial institutions onto the jurisdictions in which the account holders reside, and this must be done by September 30 this year.