"Our participation in globally accepted transparency and tax information exchange initiatives speaks volumes of our financial services integrity, and that leads to the confidence and trust that investors continue to have in us." Wayne Panton
Model I IGA
On Friday 29th November 2013, the Cayman Islands became the first Overseas Territory to sign a FATCA agreement with the US. As expected, the agreement was a Model 1 intergovernmental agreement ('IGA') that sets out the way for automatic exchange of tax information under the US Foreign Account Tax Compliance Act ('FATCA'). The agreement enables financial institutions in the Cayman Islands to report information regarding accounts and non-financial entities that are owned substantially by US citizens and residents directly to the Cayman Islands Government ('CIG'). The CIG will then relay that information to the US Internal Revenue Service ('IRS').
The two countries also signed a new Tax Information Exchange Agreement (TIEA), which stipulates the legal channels through which information will be automatically exchanged, updating the existing TIEA agreement signed back in 2001.
A positive move for both countries
The agreement is the result of three years of discussions between representatives of the two countries, and the Cayman Islands’ Minister of Financial Services, Wayne Panton congratulated the negotiation teams of both countries, adding “Signing these agreements clearly demonstrates that both Cayman and the US are committed to the stability and growth of global financial services, which contributes to stability in our country’s economies and increased opportunities for our people”. The Minister-Counsellor for Economic Affairs for the US Embassy in London, Julie Nutter, who signed the agreement on behalf of the USA, commented that ‘By working together …we can help build a stronger, more stable, and accountable global financial system’ adding that ‘We look forward to collaborating with the Government of the Cayman Islands to further these objectives’.
Support and congratulations for the Cayman Financial Services Industry
Minister Panton acknowledged the support of Cayman’s financial services industry in deciding that a Model 1 IGA was the best option for Government to pursue, recognising that that model is poised to become the global standard for multilateral automatic exchange. ‘With a Model 1 IGA, [the] Government’s Tax Information Authority will implement the standardised data-reporting framework for FATCA’, he explained, adding that it should help to defray administrative costs for financial institutions. Gonzalo Jalles, the CEO of Cayman Finance, said that the Cayman financial services industry was pleased that that Government had consulted them on which IGA to pursue, and that their recommendation had been accepted.
A CIG working group will now draft the detailed legislative framework for the implementation of the agreement. To help familiarise those in the industry with the new arrangements, Cayman Finance, in collaboration with the Ministry of Financial Services, has organised a full day’s seminar in January to cover the registration process in detail, along with other international taxation topics.
For those who would like to consider the full text of the agreements, they are available to view on line: