International Financial Law Prof Blog

Editor: William Byrnes
Texas A&M University
School of Law

Wednesday, August 5, 2015

Treasury Acknowledges More Favorable FATCA IGA Terms for BVI

Comment in response to Dr. Jack Manhire's question: What's going on with the IGAs is that Treasury has a model that, while comprehensive in scope, does not fit each countries financial system. Thus, Treasury has had to negotiate nuances with many countries' Ministry of Finance so that the IGA could be complied with locally. From that perspective, it's the same process as the Model US Tax Treaty.

Where it differs is that, the IGA has been, for the most part, a one-sided discussion of "take it or leave it - you have one week to decide" (not too much an exaggeration). Well, if it was just about the Caribbean IFCs, they would have folded. British Territory or independent, they are all substantially dependent on the US for tourism, travel, trans-shipment, medical, etc.

But our EU friends, like France and Germany, their feathers became ruffled by the urgency and complexity of what the US was proposing with FATCA, such as financial institution mass data dumps, and the possibility of billions of compliance costs without any local benefits.

Not to say, they were against FATCA. The EU already had implemented a intra-FATCA for interest payments a decade earlier, known as the EU Savings Tax Directive. The EU, back then, asked the US to sign on board, and the US rejected doing so.

Given the speed of negotiation among countries, and lack of coordination, the EU countries included the MFN condition in the IGAs. Once the cat was out of the bag, it became part of the Model.

Based on the BVI IGA for FATCA, the United States considers the language in italics to be “more favorable Treasury-Dept.-Seal-of-the-IRSterms” in Annex I, except in those cases where the Agreement already includes such language: (excerpted below in relevant part) -

Annex I: G. Alternative Procedures for New Accounts Opened Prior to Entry Into Force of this Agreement. ...

2. Alternative Procedures. 

a) Within one year after the date of entry into force of this Agreement, Reporting British Virgin Islands Financial Institutions must:

(i) with respect to a New Individual Account described in subparagraph G(1) of this section, request the self-certification specified in section III of this Annex I and confirm the reasonableness of such self-certification consistent with the procedures described in section III of this Annex I, and

(ii) with respect to a New Entity Account described in subparagraph G(1) of this section, perform the due diligence procedures specified in section V of this Annex I and request information as necessary to document the account, including any self-certification, required by section V of this Annex I. 

c) By the date that is one year after the date of entry into force of this Agreement, Reporting British Virgin Islands Financial Institutions must close any New Account described in subparagraph G(1) of this section for which it was unable to collect the required self-certification or other documentation pursuant to the procedures described in subparagraph G(2)(a) of this section.

In addition, by the date that is one year after the date of entry into force of this Agreement, Reporting British Virgin Islands Financial Institutions must: (i) with respect to such closed accounts that prior to such closure were New Individual Accounts (without regard to whether such accounts were High Value Accounts), perform the due diligence procedures specified in paragraph D of section II of this Annex I, or (ii) with respect to such closed accounts that prior to such closure were New Entity Accounts, perform the due diligence procedures specified in section IV of this Annex I. 

 Treasury's Notices of More Favorable Terms:

https://lawprofessors.typepad.com/intfinlaw/2015/08/treasury-acknowledges-more-favorable-fatca-iga-terms-for-bvi.html

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