Businesses on the Cayman Islands have welcomed the Cayman Islands Government’s successful conclusion of its negotiations with the US on a Model 1 Intergovernmental Agreement (IGA) under the US Foreign Account Tax Compliance Act (FATCA).
Businesses on the islands say the deal represents a further demonstration of the Cayman Islands Government’s commitment to transparency and the automatic exchange of tax information and this will help businesses.
The two parties have also initialled a new Tax Information Exchange Agreement (TIEA) – which had originally been signed in 2001 – and both agreements pave the way for the automatic exchange of information under FATCA. The two governments will officially sign both agreements as soon as possible, after which the texts will be publicly available.
The Model 1 IGA is an agreement between governments for automatic exchange of information in tax matters, and aims to ensure that business in Cayman will continue to operate and compete effectively with that of its global counterparts.
Law firm Walkers said the agreement underscores the positive reputation of the Cayman Islands regarding transparency and exchange of information for tax purposes. It added that foreign institutions in the Cayman Islands will benefit from the Model 1 IGA due to the streamlined reporting, through the Cayman Islands Government, information regarding accounts and non-financial entities substantially owned by US citizens and residents.
Law firm Solomon Harris commented: “Although the announcement that the Cayman Islands would enter into a Model 1 IGA was made back in March, the fact that negotiations are concluded and agreements initialled and ready to sign will give the Cayman Islands financial services industry confidence that, once again, the jurisdiction's government has shown its commitment to keeping the burden of financial regulation in proportion to its benefit.”
Gonzalo Jalles, chief executive of Cayman Finance, the organisation representing the financial services industry in the Cayman Islands, said the moves “clarified the way forward, in order for industry to progress with the implementation [of FATCA].”
Welcoming the conclusion to these negotiations, Cayman’s Minister for Financial Services Wayne Panton thanked the members of the local financial services industry who provided assistance and input into the decision to adopt a Model 1 IGA, originally announced on 15 March 2013.
US Treasury Deputy Assistant Secretary (International Tax Affairs) Robert Stack said the Model 1 IGA and new TIEA will effectively combat tax evasion and improve compliance through increased transparency, mutual cooperation, and the automatic exchange of information.
“Cayman has had a longstanding relationship with the United States regarding the exchange of tax information, dating back to the original TIEA that was signed in 2001,” Mr Stack said. “Cayman also consistently demonstrates leadership in transparency matters through its global engagement, including its work on both the Steering Group and the Peer Review Group of the OECD Global Forum on Transparency and Exchange of Information for Tax Purposes. We are especially pleased that the conclusion of an IGA will provide certainty to Cayman’s significant fund industry with respect to FATCA implementation.”
Following the signing with the US, the Cayman Islands Government will now continue its discussions with the UK HM Treasury to finalise the terms of the UK Model 1 IGA FATCA agreement.