International Client Tax Reporting
In recent years, many countries, including most offshore jurisdictions, have signed treaties and implemented agreements to enhance global tax transparency. As these agreements take effect, our financial services institution is required to collect additional information from clients to confirm the tax residency details of account holders.
Based on tax residency and/or US citizenship, we have a legal obligation to report clients' financial account information to the relevant local, regional, or extra-regional tax authority. To comply with these requirements, we must collect information and documentation from both individual and entity clients to establish their tax residency. For most individual clients, this is typically the jurisdiction where they reside and pay taxes. However, US citizens are also considered US tax residents regardless of their country of residence.
If you are unsure about your tax residency or US status, you should seek advice from a professional tax adviser or the relevant tax authority. Please note that we do not provide tax advice.
Foreign Account Tax Compliance Act (FATCA)
FATCA was enacted in 2010 by the US Congress to target non-compliance by US taxpayers using foreign accounts. FATCA requires foreign financial institutions (FFIs) to report to the IRS information about financial accounts held by U.S. taxpayers or by foreign entities in which U.S. taxpayers hold a substantial ownership interest. In most Caribbean jurisdictions, FATCA is implemented locally through an Inter-Governmental Agreement (IGA).
Who are US Persons under FACTA
Notice 2011-34 lists six indicia of U.S. status:
U.S. citizenship or lawful permanent resident (green card) status;
A U.S. birthplace;
A U.S. residence address or a U.S. correspondence address (including a U.S. P.O. box);
Standing instructions to transfer funds to an account maintained in the United States, or directions regularly received from a U.S. address;
An “in care of” address or a “hold mail” address that is the sole address with respect to the client; or
A power of attorney or signatory authority granted to a person with a U.S. address
Due to the character of FATCA, it impacts all financial and non-financial operating companies that receive any U.S. source income, including dividends, royalties, interest etc. According to FATCA, all financial institutions that keep U.S. persons’ accounts are obliged to obtain some of the documents below (subject to US indicia type):
W-9 or W-8BEN forms
Non-U.S. passport or similar documentation establishing foreign citizenship (in case of U.S. birth)
Written explanation regarding U.S. citizenship (in case of U.S. birth)
Document establishing non-US status
Common Reporting Standard (CRS)
The Organization for Economic Cooperation and Development (OECD) developed the Common Reporting Standard (CRS) in response to the G20 request for jurisdictions to obtain information from financial institutions and to automatically exchange that information with other jurisdictions on an annual basis. The CRS, based on FATCA, is being adopted by a large and growing number of countries, including most Caribbean jurisdictions. It requires the Bank to collect information from individuals and entities to establish their tax residency. Depending on the account holder’s tax residency, the bank may also be required to report financial account details to the relevant tax authorities.