December 31 deadline for FATCA compliance

Wednesday, September 28, 2016 - 04:15

As Government and the Opposition continue to publicly battle over who is to blame for this country’s failure to pass Foreign Account Tax Compliance Act (FATCA) legislation, there is new information from the United States’ Internal Revenue Service (IRS) that the critical date for the international agreement to become effective is December 31 and not September 30.

This is because the IRS, through the US Treasury Department, will only begin updating the list of countries with Model 1 and Model 2 Inter-Governmental Agreements (IGAs) on January 1, 2017, and countries not yet compliant will have until December 31 to provide an explanation as to why their IGAs haven’t been brought into force and submit a plan for doing so to the Treasury Department.

The announcement of this plan was detailed by the IRS in a statement numbered 2016-2017 and posted on its Web site since last month.

On September 16, Finance Minister Colm Imbert signed off on the IGA with US officials, giving life to the Model 1 IGA , which had been approved since 2013.

The legislation, which gives the local Board of Inland Revenue the authority to share information with the IRS regarding US citizens, was shelved after last week’s fiasco in Parliament, when Government and Opposition MPs blamed each other for what was described as a potential financial crisis.

Government has been insisting that the legislation giving life to FATCA must be passed by September 30. This has been supported by the financial sector, including the country’s major banks, which warned of dire consequences if the legislation is not passed by this deadline. 

Yesterday, Prime Minister Dr Keith Rowley again slammed the Opposition’s failure to support the legislation at a news conference, saying in an effort to stave off any fallout the Government had asked the US Treasury Department for an extension. If the country failed to get this extension, he said, the 30 per cent withholding tax would take effect and “the Government would have no call on that.” 

When questioned about the 2017 deadline at yesterday’s press conference, Rowley said, “It means that there are milestones that you have to meet and you will be gambling and walking on fig skins if you don’t meet one milestone and hope to meet the other one later.”

Opposition Leader Kamla Persad-Bissessar has been insistent that there would be no major fallout if the September 30 deadline is not met. She told a political meeting on Monday that “there is a view that the sky will fall down, I am not of the view that the sky will fall down after September 30.” (See page 5) 

US Ambassador John Estrada, who is in Washington, said in a statement yesterday that he had hoped to resolve the issue of the FATCA legislation before his trip. He said he expressed the concerns of the Government to US Treasury representatives, adding the T&T Government has submitted “to the Treasury a detailed explanation and step-by-step plan that Trinidad & Tobago intends to follow to bring the FATCA agreement into force.”

He has promised to continue to work with both the Treasury and the Government “to assure that the Government of Trinidad and Tobago follows this plan and continues to work in good faith towards implementing the FATCA agreement.” 

Wiggle room for compliance—financial analyst

But financial analyst Ian Narine told the T&T Guardian yesterday that according to the IRS document on the matter, the question of an extension does not arise given the timelines as detailed by the IRS. On the question of the withholding of tax, he said, the country was still months away from that happening.

Narine said the September 30 date being used was essentially a reporting deadline “which requires the Board of Inland Revenue to report on information for 2014 and 2015.” 

He said now that the September 30 reporting deadline will not be met, the Government must write the US authorities to explain why T&T “was not compliant with the IGA and what are the steps we are taking to make us compliant.”

“The deadline for that is December 31, and the IRS will update that on January 1, 2017,” Narine said.

Rowley said yesterday that “our Treasury solicitor wrote to his US counterpart” on the matter. 

Narine said even if the legislation is not passed and a country is operating within certain parameters, then “you are fine.” He said if on January 1, 2017, “you were not proactive to enforce the agreement, they will give you 60 days’ notice, and if there is no compliance then the withholding tax will come into effect in March 2017.”

The IRS, in its statement, said in evaluating whether a jurisdiction will continue to be treated as if it has an IGA in effect, the US Treasury Department will consider two things: (1) whether the jurisdiction has submitted the explanation and plan with the requested dates and (2) whether that explanation and plan, as well as the jurisdiction’s prior course of conduct in connection with IGA discussions, show that the jurisdiction continues to demonstrate firm resolve to bring its IGA into force.

The document states that a Model 1 IGA that had not entered into force as of September 30, last year, would continue to be treated as complying with, and not subject to withholding (tax) under, FATCA so long as the partner jurisdiction (T&T) continues to demonstrate firm resolve to bring the IGA into force and any information that would have been reportable under the IGA on September 30 last year is exchanged by September 30 this year.

SOURCE: (Rosemarie Sant)