December 19, 2013: Bermuda FATCA Intergovernmental Agreement
Foreign Account Tax Compliance Act (FATCA)
Bermuda and the U.S. Sign FATCA Intergovernmental Agreement
On December 19, 2013, Bermuda and the United States signed an Intergovernmental Agreement (“IGA”) to improve international tax compliance with respect to FATCA. The agreement is based on the Model 2 IGA and includes the FATCA deadlines consistent with Notice 2013-43. Bermuda is the third country signing the Model 2 version of the IGA following Japan and Switzerland. Few Model 2 IGAs are expected to be signed in the future highlighting the popularity of inter country reporting and reciprocal information for tax residents of partner jurisdictions from the U.S.
As with other Model 2 IGAs (and some Model 1 IGAs), the partner jurisdiction commits to direct Reporting FFIs in the jurisdiction to register on the IRS FATCA Registration System by July 1, 2014 and follow the FFI Agreement requirements (as modified by the IGA). One odd provision in the IGA which is included on the latest Model 2 IGA published by the U.S. Treasury is the due date for aggregate non-participating FFI reporting by the Reporting Model 2 FFIs. The provision states the deadline is March 15th which is the old deadline when reporting was to be completed on the Form 1042-S. After Notice 2013-69, the IRS officially switched the form and deadline to the Form 8966 with a March 31 deadline. This is consistent with the draft FFI Agreement published in the same Notice. Presumably this is an oversight and Reporting Model 2 FFIs will not have an earlier reporting date compared to participating FFIs in non-IGA jurisdictions.
The IGA also includes a standard Annex II listing certain exempt beneficial owners and products, and deemed compliant entities including: governmental entities, international organizations, central banks, certain pension/retirement funds, certain small or limited scope financial institutions qualifying as deemed-compliant FFIs1, certain investment entities qualifying as deemed compliant FFIs2, and certain account excluded from the definition of a financial account3.
As the July 1, 2014 FATCA withholding deadline approaches we can expect a continued focus on the FATCA IGAs and an increase in signing activity.
Full article, IGA agreement with U.S., and previous April 2013 press release from Government of Bermuda are available for download. For more information please contact a Deloitte FATCA Leader or click here.
1 Includes: Financial Institutions with a Local Client Base, Local Banks, Financial Institutions with Only Low-Value Accounts, and Registered Qualified Credit Card Issuers.
2 Includes: Trustee-documented trusts, Registered Sponsored Investment Entities and Controlled Foreign Corporations, Sponsored, Closely Held Investment Vehicles, certain Investment Advisors and Managers, certain Collective Investment Vehicles
3 Includes: Certain Retirement and Non-Retirement Savings Accounts, Certain Term Life Insurance Contracts, Accounts Held By an Estate, Certain Escrow Accounts, and Certain Partner Jurisdiction Accounts.
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