Guyana is set to sign an inter-government model A-1 agreement with the United States’ (US), Internal Revenue Service (IRS) that will allow for the provision of details on holders of US dollars’ accounts locally.
“This agreement will allow financial institutions in Guyana to identify and disclose details regarding the holders of United States dollars accounts (locally),” Minister of State, Joseph Harmon told media operatives, today at a post-Cabinet press briefing.
The signing of the reciprocal agreement is necessary, Minister Harmon pointed out, because, “Cabinet noted that since 2014, Guyana was regarded as having an agreement which required local financial institutions to submit reports for 2014, but were unable to do so because the agreement was not in place.”
Minister of State, Joseph Harmon
Further, Minister Harmon explained that as a consequence, reports for 2014 and 2015 are now due to be submitted by September 30, 2016.
The Fair and Accurate Credit Transactions Act (FACTA) was enacted by the US in March 2010, aiming to combat tax evasion by US taxpayers. In brief, under FACTA, foreign financial institutions (FFIs) are required to sign agreements with the US, IRS to identify and disclose details regarding their US account holders.
These financial institutions will be required to withhold tax for relevant US account-holders who do not give consent to such disclosures, or to close such accounts.
An FFI which does not sign or is not otherwise exempt will face a punitive 30% withholding tax on all “withholdable payments” derived from US sources, initially including dividends, interest and certain derivative payments.
In addition, starting from 2017, gross proceeds such as sales proceeds and returns of principal derived from stocks and debt obligations generating US source dividends or interest, will be treated as “withholdable payments”.
“The signing of this IGA will also allow the completion of the service agreement with the software provider for the installation of reporting software relating to the foreign accounts compliance act also known as FATCA, thus bolstering Guyana’s Anti Money Laundering and Countering the Financing of Terrorism (AML/CFT) thrust,” Minister Harmon said.
The US has developed two Model Inter Government Agreements to simplify the implementation of FATCA. Model I establishes a framework of reporting account information on US persons by financial institutions to the relevant domestic authority which in turn provides the information to the US, IRS.