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Thursday, May 29, 2025

T&T to sign pact with IRS

by

20131027

T&T will sign an in­ter-gov­ern­men­tal agree­ment (IGA) with the Unit­ed States In­ter­nal Rev­enue Ser­vice (IRS) on De­cem­ber 31, the Cen­tral Bank has said.In its most re­cent Fi­nan­cial Sta­bil­i­ty Re­port re­leased Oc­to­ber 16, cov­er­ing up to June, the Cen­tral Bank said that this will hap­pen as T&T and oth­er Caribbean coun­tries move to com­ply with the US' For­eign Ac­count Tax Com­pli­ance Act (FAT­CA).

FAT­CA, a US tax law which came in­to ef­fect in Jan­u­ary, was de­signed and en­act­ed to com­bat off­shore tax eva­sion by "US per­sons" with ac­counts and/or in­vest­ments with both for­eign fi­nan­cial and non-fi­nan­cial en­ti­ties.FAT­CA places a re­quire­ment on for­eign fi­nan­cial in­sti­tu­tions (FF­Is) to iden­ti­fy and re­port in­for­ma­tion on cer­tain "US per­sons" in­vest­ed in ac­counts out­side of the US and for cer­tain non-US en­ti­ties to pro­vide in­for­ma­tion about any US own­ers to the IRS.

A "US per­son" un­der FAT­CA refers to a cit­i­zen or res­i­dent of the Unit­ed States of Amer­i­ca, a US part­ner­ship or cor­po­ra­tion. FF­Is in­clude, but are not lim­it­ed to, com­mer­cial banks, non-bank fi­nan­cial in­sti­tu­tions, as­set man­agers, in­vest­ment prod­ucts and in­sur­ance com­pa­nies where prod­ucts have an in­vest­ment el­e­ment, the Cen­tral Bank ex­plained.

"It is ex­pect­ed that FAT­CA may im­pact both fi­nan­cial and non-fi­nan­cial com­pa­nies in Trinidad and To­ba­go that re­ceive in­come from a US source, ei­ther di­rect­ly in the con­duct of their busi­ness, or in­di­rect­ly through re­la­tion­ships with oth­er fi­nan­cial in­sti­tu­tions. Non-com­pli­ance car­ries sig­nif­i­cant im­pli­ca­tions for lo­cal fi­nan­cial in­sti­tu­tions," the Cen­tral Bank said.To com­ply with the FAT­CA re­quire­ments, T&T must re­solve some is­sues.

First, "con­flicts with lo­cal laws which pro­hib­it the dis­clo­sure of con­fi­den­tial in­for­ma­tion." The bank ex­plained that "cur­rent­ly, lo­cal dis­clo­sure laws pre­vent lo­cal in­sti­tu­tions from shar­ing con­fi­den­tial client in­for­ma­tion. Con­se­quent­ly per­ti­nent leg­is­la­tion would have to be amend­ed or en­act­ed to en­sure com­pli­ance with FAT­CA re­quire­ments."

Sec­ond, there are "im­pli­ca­tions for in­sti­tu­tions with cross-bor­der ac­tiv­i­ties" re­gard­ing the choice of mod­el IGA adopt­ed. Two of the largest in­dige­nous banks in T&T, First Cit­i­zens and Re­pub­lic Bank Ltd own banks out­side of T&T."If an FFI main­tains branch­es out­side of one ju­ris­dic­tion, then such branch­es would not be cov­ered by the IGA signed in the head of­fice ju­ris­dic­tion. Con­se­quent­ly, FF­Is must be cog­nisant of the IGA adopt­ed in each ju­ris­dic­tion where they have op­er­a­tions, in or­der to en­sure com­pli­ance," the re­port said.

Third, "tech­nol­o­gy lim­i­ta­tions" means that "com­pli­ance with FAT­CA re­quires the in­stal­la­tion of new and ex­tend­ed in­for­ma­tion sys­tems to en­able lo­cal in­sti­tu­tions to ful­fill the re­port­ing re­quire­ments."The reg­u­la­tor of banks in T&T said it is adopt­ing a "re­gion­al ap­proach to the FAT­CA reg­u­la­tions." T&T is a mem­ber of a Re­gion­al Task Force cre­at­ed by the Caribbean Com­mu­ni­ty's Coun­cil of Fi­nance and Plan­ning un­der the aus­pices of the Caribbean As­so­ci­a­tion of Banks.

"The task force is work­ing to­wards a re­gion­al ap­proach with re­gard to FAT­CA com­pli­ance in ar­eas which al­low for a re­gion­al ap­proach. With re­gard to spe­cif­ic coun­try-to-coun­try ne­go­ti­a­tions with the US, some is­lands in­clud­ing Trinidad and To­ba­go have be­gun the process of ne­go­ti­at­ing IGAs with the IRS," the re­port said.


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