American expats living in the Caribbean region should be prepared for FATCA. The Caribbean Community, CARICOM, is in the process of adopting measures to comply with the Foreign Account Compliance Act. To learn more about FATCA, please read What is FATCA.
The Caribbean Community is complying with the FATCA
The Caribbean Community, CARICOM, consists of 15 states in the Caribbean region: Antigua and Barbuda, Bahamas, Barbados, Belize, Dominica, Haiti, Jamaica, Grenada, Guyana, Montserrat, St. Lucia, Suriname, St. Kitts and Nevis, St. Vincent and the Grenadines, and Trinidad and Tobago. CARICOM created a task force to find the best FATCA approach for the region. Jamaica is leading the Community to facilitate the implementation of Foreign Account Compliance Act, FATCA. American expats who believed that the Caribbean countries are a tax heaven should think twice.
FATCA, Foreign Account Compliance Act, was originally enacted in March 2010 to fight tax evasion by US citizens and green card holders who hold offshore accounts. Per FATCA, the US persons with foreign assets located outside of the United States must report the information about these assets to the Internal Revenue Service (IRS). Under FATCA, the foreign financial institutions are required to report directly or indirectly certain information about accounts owned by US citizens and green card holders or foreign entities with a substantial ownership percentage by US persons.
The FATCA, Foreign Account Compliance Act, implementation in the Caribbean region is unique due to the countries sovereign rights and the importance of safeguarding the region’s financial sector. Moreover, in the past some of the Caribbean countries were on the list of countries with strategic Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) deficiencies.
However, many Caribbean countries are well prepared to proceed with FATCA. Several CARICOM countries have double taxation treaties with the USA. Additionally, some Caribbean countries signed Tax Information Exchange Agreements (TIEAs) with the United States. As a result of it, the implementation of FATCA intergovernmental agreement can be quite easy for some countries. Under the FATCA IGA, the financial institutions will report information to the authorities in their country and these foreign authorities will report the information to the IRS.
The intergovernmental model is the most beneficial for the Caribbean community for several reasons:
- The USA will not withhold on payments to financial institutions.
- Participating financial institutions will be considered FATCA compliant and present a low risk of tax evasion.
- Financial institutions will not be required to terminate the accounts of US holders.
- Pass-through withholding will be imposed on payments to other financial institutions that are FATCA participants.
Recently Antigua and Barbuda announced that they would join the rest of CARICOM in implementing measures that will allow them to comply with the United States Foreign Account Tax Compliance Act, FATCA.
American expats residing in the Caribbean countries that are a part of CARICOM must review their foreign financial assets and determine whether they failed to comply with US expatriate tax requirements. American expats who need help with FATCA, US expatriate tax preparation or other overseas tax issues, must consult an expat tax CPA that provides international tax services. International tax experts at Artio Partners are here to help you.