Jersey and Guernsey assess FATCA implications

Guernsey and Jersey are in the throes of assessing the latest US Foreign Account Tax Compliance Act (FATCA) proposals and the effect on financial institutions based in each of the centres.

In a statement, Jersey Finance said: “The FATCA provisions are in the form of guidance, which make it clear that the US has taken into account representations from foreign governments, of which Jersey was one, in seeking to minimise the reporting burden.

“It is important to note that, not all financial institutions in Jersey will be engaging in activities that are affected by FATCA, or, if they are, some to only a rather limited extent.

“The FATCA provisions will apply to all jurisdictions - they are not directed at centres such as Jersey alone - and so they should not adversely affect Jersey’s competitive position.”

Guernsey Finance also said Guernsey's government is currently digesting details of the latest proposals and looking at the implications for financial institutions operating out of Guernsey.

A joint release by the United States, France, Germany, Italy, Spain and the United Kingdom announced plans to pursue a government-to-government framework for implementing FATCA.

This would remove the obligation for financial institutions to report directly to the US revenue, avoiding costly compliance and legal barriers for firms at individual level.

It is envisaged that the proposed regulations will in many ways permit financial institutions to rely on information they already collect, including information received to comply with anti-money laundering and “know your customer” rules.

Commenting on the release of the proposals, Acting Assistant Secretary for Tax Policy in the US Emily S. McMahon said: “When taxpayers overseas avoid paying what they owe, other Americans have to bear a disproportionate share of the tax burden.

"FATCA is an important part of the US government’s effort to address that issue, and these regulations implement FATCA in a way that is targeted and efficient . We believe these efforts will serve as a complement and catalyst to the ongoing global efforts to combat offshore tax evasion.”

Jersey and Guernsey have appointed working parties to look into the implications to guide and support financial institutions likely to be affected, prior to introduction of regulations in 2013.