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The Central Bank of Barbados has confirmed that the territory has established a Working Group to negotiate an inter-governmental agreement (IGA) with the United States within the next six months to facilitate compliance with the Foreign Account Tax Compliance Act (FATCA).
In its monthly newsletter, the Central Bank disclosed that it was engaged with the island's promotional agency Invest Barbados, to develop a response to the US regulation, with input from the local financial services industry, and on the basis of discussions with other Caribbean nations' policymakers.
FATCA was enacted by the United States Congress in March 2010 and is intended to ensure that the US tax authorities obtain information on financial accounts held by US taxpayers, or by foreign entities in which US taxpayers hold a substantial ownership interest, with foreign financial institutions (FFIs). Failure by an FFI to disclose information would result in a requirement to withhold 30% tax on US-source income.
To simplify the administration of the new system, several countries have been invited to enter into an IGA with the US on a bilateral basis, to ease the compliance burden on local financial institutions by allowing them to report data directly to the tax authority in the country in which they are based, rather than to the US Internal Revenue Service.
The Central Bank said that in order to meet the January 1, 2014 deadline, the territory needed to adopt a proactive approach in recognition "that the growth and continuation of its vibrant international business sector depends on its compliance with this US initiative."
"To this end, a working group under the joint leadership of Invest Barbados and the Central Bank of Barbados and comprising representatives from the Ministry of International Business, the Inland Revenue Department, the Barbados International Business Association, the Institute of Chartered Accountants of Barbados and the Barbados Bankers Association, has been established to keep abreast of the FATCA developments and to make recommendations to the Government of Barbados on its response," it said, reporting that these representatives had met twice last month.
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