Forget About Stashing Your Cash in the Cayman Islands

The US Treasury has announced that the United States has signed  intergovernmental agreements (IGAs) with the Cayman Islands this week to  implement the Foreign Account Tax Compliance Act (FATCA).

“Today’s announcement marks a milestone in the effort to promote global  tax transparency,” said Deputy Assistant Secretary for International Tax  Affairs Robert B. Stack. “These agreements underscore growing  international cooperation in the effort to end tax evasion everywhere.”

FATCA, enacted in 2010, seeks to obtain information on accounts held by  U.S. taxpayers in other countries.  It requires U.S. financial  institutions to withhold a portion of payments made to foreign financial  institutions (FFIs) that do not agree to identify and report  information on U.S. account holders.  FFIs have the option of entering  into agreements directly with the IRS, or through one of two alternative  Model IGAs signed by their home country.

Signed this morning, the Cayman Islands IGA is a Model 1B agreement,  meaning that FFIs in the Cayman Islands will be required to report tax  information about U.S. account holders directly to the Cayman Islands  Tax Information Authority, which is the sole channel in the Cayman  Islands for the provision of tax-related information to other  governments. The Cayman Islands Tax Information Authority will in turn  relay that information to the IRS. Additionally, the United States and  the Cayman Islands also signed a new Tax Information Exchange Agreement  (TIEA), to take the place of the original TIEA signed in 2001.

“By working together to detect, deter, and discourage offshore tax  abuses through increased transparency and enhanced reporting, we can  help build a stronger, more stable, and accountable global financial  system. We look forward to collaborating with the Government of the  Cayman Islands to further these objectives,” said Julie Nutter,  Minister-Counselor for Economic Affairs at the U.S. Embassy in London,  who signed on behalf of the United States.

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