(CNS Business): Following the recent publication of new rules for government to government tax reporting requirements, developed by the US Treasury Department in conjunction with the OEDC, the Cayman Islands government has said it is waiting for the publication of a second model currently being developed by the US with Japan and Switzerland in order to evaluate all options for complying with the looming FATCA requirements. The Foreign Account Tax Compliance Act (FATCA), set to kick in at the beginning of 2014, will require banks outside the US to report to the Internal Revenue Service (IRS) on assets held abroad for US clients or face a 30% withholding tax.

The Cayman FATCA Task Force says it is considering both models as well as other possible FATCA developments before deciding on any reporting arrangement with the US.

“Government is aware of FATCA developments, including the recent publication of the US Treasury’s Model 1 Intergovernmental Agreement to Improve Tax Compliance and to Implement FATCA,” said Samuel Rose, representing the Task Force. “The Model 2 Intergovernmental Agreement, now in development with the US Treasury, Japan and Switzerland, also is expected to be released soon.”

Rose said the Cayman Islands Government will continue to monitor these and other possible FATCA developments, as the collective basis upon which it will make its decision on whether to enter into a government-to-government reporting arrangement with the US.

FATCA also contains language directed specifically toward foreign financial institutions (FFIs) that requires them to be prepared to meet FATCA’s proposed compliance obligations, regardless of whether a government has a reporting agreement in place.

“Government understands that the FFIs in the Cayman Islands are well on their way to ensuring that they are taking the necessary measures to comply with FATCA”, said Rose, who is the deputy chief officer in the Ministry of Finance (Financial Services).

Cayman Islands Premier McKeeva Bush said, “Government is keeping track of the discussions surrounding FATCA, and evaluating both information and dialogue in order to make the best choice for our jurisdiction regarding a reporting arrangement,” he said. “We will be in a position to decide on the best way forward once the Model 2 Intergovernmental Agreement is published and we have been able to fully evaluate all the options. As Government continues this process, it is encouraging that FFIs in the Cayman Islands are moving ahead with their particular preparations, in accordance with US requirements."

Government’s FATCA Task Force comprises the Office of the Financial Secretary; the Attorney General’s Chambers; the Tax Information Authority; the Cayman Islands Monetary Authority; and the Ministry of Finance (Financial Services).

Related articles:

New rules for FATCA (July 2012)

Bush plans US trip re FATCA (February 2012)

FATCA tsunami about to hit (August 2011)