The Ministry of Financial Services, the Ministry of Finance and the Office of the Attorney General, have revealed that the Bahamas is well advanced in the process of finalizing its compliance arrangements with the United States Foreign Accounts Tax Compliance Act (FATCA). According to a statement, The Ministry will continue to take all necessary measures to ensure that Bahamian entities are permitted to conduct business without impediments in global markets.
But, Lawrence Lewis, a partner at Deloitte & Touche, recently described the Bahamas FATCA compliance mechanism the Bahamas as “no small undertaking,” suggesting there was no simple “flip of the switch” for providers once the government has the infrastructure in place. While Bahamas-based financial institutions have made advances towards FACTA readiness, he anticipated a rush to the finish line once the government provides clarity regarding the inter-governmental agreement (IGA).
“While I understand the Ministry’s position in wanting to wait until there was a lot more clarity in respect to what they would do with respect to the IGA, it does put institutions at a little bit of a disadvantage,” Lewis said in a statement.
According to Lewis, the government must go through its processes, get the technology ready and then business will have a level of interaction and get their systems lined up. “That’s not quite as easy as flipping a switch when the Government says they are ready. The more lead time they have, the better they would feel about it,” he explained.
In terms of the industry’s state of readiness, Lewis feels the industry continues to progress, but he suspects there will still be a lot of organizations that will have challenges.
Lewis added, “I think overall there has definitely been significant advancement over the past few months. I expect it will be a mad dash to the finish once the government provides a more clarity around the IGA and the legislation. That’s when you will see a lot of organizations that may not have paid a lot of attention or just lip service to it really move to try and complete the things they need to do.”
The government has chosen a Model I Intergovernmental agreement (IGA) with the U.S. Treasury for FACTA compliance. FATCA, which was brought into law in 2010, is a set of rules set out by the IRS designed to limit tax evasion by U.S. citizens living abroad. Under FATCA, U.S. taxpayers holding financial assets outside the country must report those assets to the IRS or face penalties.
The target date to be fully signed up to FATCA is July 1, 2014.
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