DATE: April 1, 2014 NO. 24/2014
Registration of Licensed Non-bank Financial Institutions in Compliance with FATCA
ST. GEORGE’S, GRENADA, Tuesday April 1, 2014: The Member Governments of the Eastern Caribbean Currency Union (ECCU) have commenced discussions with the United States of America (US) towards executing an Inter-Governmental Agreement (IGA) for the implementation of the provisions of the US Foreign Account Tax Compliance Act (FATCA).
On 18 March 2010, the US Government enacted FATCA to combat tax evasion by specified US persons holding investments in accounts outside of the United States, specifically as it relates to US-sourced income (see Annex). FATCA requires Foreign Financial Institutions (FFIs) to report to the US Internal Revenue Service (IRS), information on assets of US$50,000 or more held by US taxpayers, or by foreign entities in which US taxpayers hold substantial ownership interest. Failure of an FFI to submit information could result in a 30.0 per cent withholding tax levied on withholdable payments  and may result in the potential loss of correspondent banking relationships.
The ECCU Member Governments have decided to pursue IGA Model 1. This model requires financial institutions to submit customer information to the Inland Revenue Department of the Government of Grenada for onward submission to the IRS. Member Governments have also undertaken to pass the “Foreign Account Tax Compliance (United States) Implementation and Enforcement Bill, 2014”, to provide for the legal submission of customer information for the purposes of FATCA.
In the circumstances all non-bank financial institutions, including off-shore banks, are required to register on the IRS Portal prior to the 25 April 2014 deadline. Timely registration by the deadline would avoid the imposition of the 30.0 per cent withholding tax, the penalty for non-compliance under REG-121647-10 of the “Regulations Relating to Information Reporting by Foreign Financial Institutions and Withholding on Certain Payments to Foreign Financial Institutions and Other Foreign Entities” issued by the IRS. Withholding commences on 1 July 2014.
Institutions are required to visit http://www.irs.gov/Businesses/Corporations/FATCA-Registration where information pertinent to the registration process can be found. It is important that the “IGA Country” option is selected when performing the registration exercise.
 Substantial ownership interest generally means ownership of 10.0 per cent of the company stock.
 A withholdable payment is defined in section to mean: (i) any payment of interest, dividends, rents, salaries, wages, premiums, annuities, compensations, remunerations, emoluments, and other fixed or determinable annual or periodical gains, profits, and income (FDAP income), if such payment is from sources within the United States; and (ii) any gross proceeds from the sale or other disposition of any property of a type which can produce interest or dividends from sources within the United States.