The agreement was signed at a ceremony in London’s US Embassy last Thursday by Albert Isola, Gibraltar’s minister for financial services and gaming.
Isola was accompanied by finance centre director James Tipping, Gibraltar finance senior executive Michael Ashton and gambling regulator Phill Brear.
Gibraltar’s government said the signing follows “consultation with the industry” and a review of the views of a working group set up specifically to consider the foreign account tax compliance act and its impact on the financial services sector.
It said the agreement aims to improve international tax compliance through mutual assistance in tax matters based on an “effective infrastructure for the automatic exchange of information”.
Isola said: “The international community considers automatic exchange of information to be the most effective way to tackle tax evasion while minimising costs for governments and business.
“The signing of the FATCA IGA with the United States demonstrates that Gibraltar is committed to working together with partner countries in leading the agenda on tax transparency, thereby boosting global efforts to eradicate tax evasion.”
FATCA is part of the US Hiring Incentives to Restore Employment Act. It ensures that US persons, wherever they are located and in whatever investment vehicle they hold their assets, are paying the correct amount of US tax.
It requires foreign financial institutions to report information to the Internal Revenue Service about financial accounts held by US taxpayers, or by foreign entities in which US taxpayers hold a substantial ownership interest.
When the act comes into force, those who are not compliant will suffer a 30% withholding tax on income and gross proceeds.
An IGA makes it easier for partner countries to comply with the provisions under FATCA. The benefits of an IGA include the relaxation of deadlines and increased clarity and simplicity around due diligence with country specific provisions.
For a comparison between the IGA model 1 and 2 click here.
