British Virgin Islands Premier, Hon. Dr. Orlando Smith, on 30 June 2014 in Washington DC, signed the inter-governmental agreement (IGA), relating to the US Foreign Account Tax Compliance Act (FATCA), with the United States Government. The Premier was accompanied by the Financial Secretary, Mr Neil Smith.
As anticipated, the IGA is based on the Model 1B agreement and the signing paves the way for formal implementation of FATCA in the BVI. This includes local enabling legislation adopting both the IGA and guidance notes in respect of the FATCA regime. The Government of the BVI is expected to shortly release draft guidance notes for industry input.
The announcement is welcomed by the industry for bringing greater certainty as the BVI advances towards full and successful legal compliance with and implementation of FATCA. According to the BVI Government press release, Premier Smith said: “This signing allows financial institutions organised in the Virgin Islands to prepare for the implementation of FATCA on the basis that there will be an effective IGA in place by January 1, 2015.”
A Model 1 IGA requires reporting by BVI resident financial institutions on US accounts directly to the BVI Government followed by the exchange of this information with the United States on an automatic basis, the key benefit of such an arrangement being that there will be no direct reporting by BVI entities to the United States Government. The BVI’s financial institutions have until the end of 2014 to obtain a Global Intermediary Identification Number (GIIN).
Some of the earlier negotiations were prolonged due to the BVI’s efforts to secure exceptions for non-profit organisations and pension plans and their accounts. This latest initiative demonstrates the BVI’s resolve and commitment to global tax transparency and cooperation, and the fight against illicit tax practices. The BVI currently has 26 Tax Information Exchange Agreements in place with major countries, including the US.