Gibraltar’s financial community must immediately prepare itself for FATCA or it risks getting caught up in the legislation’s strict international net, says an authority from the jurisdiction.
Helvetic, a fund adminstrator based in the British overseas territory, says many financial institutions in the area are underestimating the compliance costs of the US Foreign Account Tax Compliance Act.
Chief executive Nicola Smith said many are unaware that the costs of collecting US information about all clients has to be met by a financial organisation itself, rather than the US Internal Revenue Service (IRS) to whom the information is sent.
Risk director at Helvetic, Charles Foster, said the company has worked with the financial community of Gibraltar in order to provide them with “all the necessary information” needed in order to comply with FATCA.
He added that Gibraltar has avoided the global misconception that FATCA compliance is a complex process required only by those who deal with US clients, an inaccuracy which has seen organisations in many countries turn American citizens away from their services.
“This is not the case, it is highly likely that if you are a foreign financial institution (FFI) you will need to register whether or not you have clients who are US citizens,” he said.
In order to help citizens prepare for FATCA, the company held an event earlier this year which aimed to address concerns about the arrival of the new regulation, as well as its future implications.
“The strong turnout clearly demonstrates that Gibraltar’s financial community is actively engaging in discussing and demonstrating their progress on pressing regulatory issues,” said Smith. “The event explained that compliance with the new regulations is not onerous, and that all FFIs need to work with their service providers to find a solution which allows them to comply.”
Passed in 2010 by Barack Obama, FATCA aims to hold American citizens to account for all their incurred taxes, as their tax duties remain regardless of whether they have moved either themselves or their money from the US.
Following the introduction of the act’s “withholding stage” on 1 July this year, FFIs must now disclose all US-related information about new and existing clients to the IRS.
In the event that an FFI fails to comply, a 30% tax will be imposed by US authorities on any withholdable payments.