The US scored another victory in its quest to get foreign financial institutions to give up information on their US account holders when the Cayman Islands announced on Wednesday that the two countries have entered into an agreement to automatically exchange information. Both governments have initialled the agreement and intend to sign it shortly.
At the same time, the Cayman Islands announced that it will also enter into a similar automatic information exchange agreement with the UK.
The agreement between the US and the Cayman Islands will be a Model 1 intergovernmental agreement (IGA) under the terms of the Foreign Account Tax Compliance Act, which the US enacted in March 2010 in an effort to curb offshore tax evasion. FATCA has a wide scope, with reporting requirements directed at foreign financial institutions, certain nonfinancial foreign institutions, and individuals.
Under the Model 1 IGA, Caymans Islands’ financial institutions will provide information on their US account holders to the Cayman Islands government, which will relay the information to US tax authorities.
The agreements with the US and UK continue the Cayman Islands’ move to shed its image as a tax haven. In its announcement, the Cayman Islands Ministry for Financial Services said it “underscores the Islands’ positive reputation regarding transparency and exchange of information for tax purposes.”
Minister for Financial Services Rolston Anglin also noted in an address to the Cayman Islands’ Legislative Assembly that the Cayman Islands has 30 tax information exchange agreements in place and has been working with the Global Forum on Transparency and Exchange of Information for Tax Purposes.
—Alistair Nevius (firstname.lastname@example.org) is editor-in-chief, tax for CGMA Magazine.