A NEW American tax law could have an ‘enormous’ effect on financial institutions in the Isle of Man, it has been claimed.
The US has just released draft regulations over 389 pages covering the implementation of FATCA, the controversial US tax law aimed at gathering information about Americans holding financial assets abroad.
FATCA stands for the Foreign Account Tax Compliance Act.
David Parsons, associate director with KPMG in the island said: ‘The regulatory burden it will impose on financial institutions around the globe, including here in the Isle of Man, is enormous.
‘The time to act is now.’
And Gordon Wilson, advisory director for PwC (PricewaterhouseCoopers) in the Isle of Man, said: ‘The proposed regulations appear to reduce the burden of implementation but leave financial institutions with a significant amount of work in order to ensure compliance. The impact of the intergovernmental approach which is finally adopted will also have an impact on what financial institutions are required to do to comply with FATCA’.
Mr Parsons of KPMG said some of the more contentious aspects of the proposed regime have been watered down with possible delays expected regarding its full implementation - and this was to be welcomed.
He said: ‘However, the core requirements as well as the key deadlines, have not moved. Therefore, for those island-based institutions affected (including trust companies, banks, fund/ investment management and insurance companies), it really is a case of “full speed ahead” in terms of dealing with FATCA.
‘In addition, in what might be seen as an almost unprecedented move, France, Germany, Italy, Spain and the UK have agreed to work together with the US Treasury to implement the FATCA provisions through bilateral reciprocal arrangements. In other words, there will be an automatic exchange of information between those six countries.
‘A US Treasury spokesman is quoted as stating that the US would be happy to agree similar deals with other countries, including the Cayman Islands and Switzerland - as well as the Isle of Man, I am sure.’
Mr Parsons added the Isle of Man has been busy signing up to Tax Information Exchange Agreements (TIEAs) with other countries in recent years. The first such agreement signed by the island was with the US in 2002. These TIEAs, which broadly follow the same standard form, deal with the exchange of information on request.
‘Except where the US lead (as they did with TIEAs), others will follow; meaning that it may not be too long before other major jurisdictions look to implement FATCA style provisions, and automatic exchange of information will become the new global standard on information exchange - which is what the EU and the OECD have wanted all along.’
KPMG will be hosting a seminar on FATCA on February 27 at the Claremont Hotel, Douglas. Interested persons should contact KPMG on 681014.
PwC will be holding FATCA update briefings in the near future for clients and contacts.