The news of the FATCA intergovernmental agreement (IGA) with the US, and information reporting "package" with the UK, was contained in a statement this morning by Jersey chief minister Ian Gorst.
It comes a little more than five months after a joint announcement by all three UK Crown Dependencies – Jersey, Guernsey and the Isle of Man – that they would look to follow a model IGA published by the US and agreed to by the UK last year.
Among the surprise features contained in the agreement with the UK is a so-called disclosure facility, which would allow UK-resident investors with assets in Jersey to "regularise their past tax affairs" prior to information on their accounts being automatically exchanged. Details on this scheme were not given.
In a related development, the Cayman Islands has agreed to a "model 1" FATCA IGA with the US, according to media sources there. In a report carried on the CayCompass.com website today, Cayman Islands Minister for Financial Services Rolston Anglin was reported to have said the jurisdiction was also looking to apply “a similar arrangement for the automatic exchange of certain information with the United Kingdom”, and that final negotiations to this end were expected to conclude quickly.
‘Outstanding matter’
In his statement, Gorst said that the “only outstanding matter” still standing between a finalised FATCA agreement between Jersey and the US was "a jurisdiction-specific annex, on which a response from the US is awaited”.
He said the all-but ratified FATCA deal meant that Jersey financial institutions would now be able to plan their businesses through next year, when FATCA takes effect, knowing “that they will be operating under the umbrella of an intergovernmental agreement”.
“We hope to be able to sign the full agreement, including the annex, shortly,” Gorst said.
Once the agreement signed, it must be ratified by the States of Jersey before it may be adopted.
UK FATCA
On the subject of the agreement with the UK, Gorst noted that there had been some initial concerns, shared by Guernsey and the Isle of Man, that agreeing to a "UK FATCA" could leave them at a competitive disadvantage with other jurisdictions. But after weighing up a number of factors, he said a package had been agreed with the UK "similar to those committed to by the Isle of Man and Guernsey".
He referred to Jersey’s "centuries-old special relationship with the UK", and noted that the new information-reporting deal "puts beyond doubt our long-held commitment to ensuring that the island is not used for tax evasion by UK resident tax payers".
"Our internationally recognised reputation for being transparent and well regulated is a key strength of our financial services sector, and what we have now agreed with the UK will serve to further reinforce this message," he said.
"It is also in the island’s long-term interests to keep in step with the global direction of travel towards greater transparency.”
Today’s announcement follows a consultation with Jersey’s financial services industry that ended on Friday.
According to Gorst, the agreement between Jersey and the UK comprises:
- The main body of an intergovernmental agreement ( IGA) that closely follows the FATCA IGA being negotiated with the US (aside from the jurisdiction specific annexes);
- An alternative reporting arrangement for UK residents who are categorised as non-domiciled for tax purposes (res non-doms), which will be included in an annex to the IGA, and which will be finalised to the same timetable as the IGA currently being negotiated with the US — the main body of which has already been initialled with the US authorities;
- A disclosure facility, full details of which will be published shortly, to enable UK taxpayers to regularise their past tax affairs
He referred to Jersey’s "centuries-old special relationship with the UK", and noted that the new information-reporting deal "puts beyond doubt our long-held commitment to ensuring that the island is not used for tax evasion by UK resident tax payers".
FATCA ‘the direction’
FATCA, which was signed into law by President Obama in 2010 and takes effect for the most part next January, was aimed at cracking down on the use by American citizens of offshore accounts to avoid their US tax obligations. The initial reaction of the financial services industry to the legislation’s considerable, and costly, reporting requirements was disbelief, with many insitutions deciding it would be easier to avoid having Americans as clients than to comply.
In recent months, though, experts have come to believe, as Malcolm White, FATCA policy lead at HM Revenue & Customs said last year, that FATCA is now seen as "undeniably the direction of travel".
