A year ago I wrote an article loosely referencing one of the great rock icons of our time, Mr David Bowie. I’m not sure if Bowie would have welcomed that or the tenuous connection with this subject matter but it seems an opportune moment to once again ask ‘where are we now?’, this time in relation to the Isle of Man, US and UK FATCA.
10 October 2013 – Inter-Governmental Agreement (“IGA”) signed with the UK
13 December 2013 – IGA signed with the US
31 January 2014 – Isle of Man Government (“IOMG”) issues draft guidance notes for comment by 14 March 2014
31 March 2014 – IOMG to issue final guidance notes (and local legislation?)
25 April 2014 – ‘standard’ deadline for Foreign Financial Institutions (“FFIs”) to register on US portal for a Global Intermediary Identification Number (“GIIN”) (n/a for FFIs with Model 1 IGA including Isle of Man)
2 June 2014 – first IRS list of participating FFIs published (updated monthly)
1 July 2014 – implementation date for US and UK FATCA (US withholding tax applied from this date for non-registered FFIs but note n/a for FFIs with Model 1 IGA)
1 January 2015 – ‘extended’ deadline for FFIs with Model 1 IGA to obtain a GIIN from US (registration date TBC)
30 September 2015 – FFIs with Model 1 IGA to report 2014 accounts to US (indirectly) and annually thereafter (reporting in non Model 1 jurisdictions begins 31 March 2015)
30 September 2016 – on-going US reporting and information to be exchanged with UK (indirectly) for 2014 and 2015 calendar years and annually thereafter.
IGAs and registration
The IGAs entered into with the US and UK are intended to make our lives a little easier, but how? As can be seen in the above timetable, for registration and reporting purposes the agreements actually ‘buy’ Isle of Man financial institutions additional time. For example, in the absence of the IGA, institutions would be required to register directly with the IRS by 25 April 2014 in time for the implementation of FATCA in July. With the IGA in place a GIIN needs to be obtained by 1 January 2015. Therefore, to meet this ‘extended’ deadline, registration is likely to be required by early to mid October, though this is still to be confirmed. It is worthwhile noting that whilst there is a US portal open for US FATCA registrations, there is not a separate process, as yet, for UK registration purposes.
Reporting process and methods
Under the terms of both IGAs, institutions in the Isle of Man will report directly to the Assessor of Income Tax as opposed to direct to the IRS or HMRC. There is little understanding at present of how the Government will collate and distribute the information it receives so there remains some uncertainty as to how firms will facilitate this, particularly in respect of the reporting format.
The agreements also provide a number of useful, alternative reporting methods for trust and corporate service providers to consider. For example, satisfying the definition of a Trustee-Documented Trust enables an Isle of Man trustee to register and report on behalf of the Isle of Man trusts it acts for rather than each individual trust having to separately undertake these obligations. This should reduce some of the administrative burden, particularly at the registration stage.
A shock for some
As the processes surrounding FATCA and the IGAs gather momentum it is apparent that many firms in the Isle of Man are only just now waking up to the impact this has on them. Whilst I suspect complacency from some quarters, this delayed shock also derives from uncertainty, drip-fed information, changes to and differences in definitions and terminology as well as the long lead in period from when FATCA was first signed into law in 2010. It is useful that draft guidance notes have now been published but without the accompanying local legislation it is still difficult in some respects to place the notes in their proper context without the clarity of the statutory position. Hopefully, this will follow soon.
Strong reactions abroad
Recent weeks have seen an upsurge in resistance to FATCA with the US Republican Party formally approving a resolution to repeal the legislation. In terms of the work and time to be expended on FATCA in future months and years it may be comforting to think that such a magic wand could be waved and the ‘burden’ of FATCA disappears. In reality, the probability of this scenario unfolding is unlikely based on how far we have already progressed along this route. Further, tax transparency and automatic exchange of information are both here for the long term, as evidenced by the recent OECD release of a global common reporting standard for automatic exchange of tax information. Intended to supplement current measures this may, in practice, supersede elements of existing information agreements. And so, it continues …
It is clear there is still a huge amount of work required from businesses and governments alike to successfully facilitate the many provisions of FATCA. The heat is now definitely being turned up and as a consequence we are all starting to feel a little ‘under pressure’.