On 28 November 2013, the British Virgin Islands ("BVI") and the United Kingdom, via an Exchange of Letters amending their existing 2008 Tax Information Exchange Agreement, agreed to permit the automatic exchange of financial information relating to United Kingdom tax payers who hold accounts in the BVI ("UK IGA"). An agreement was also signed to improve international tax compliance, setting out precise details of the information which will be automatically exchanged.
The conclusion of this arrangement follows the signing of similar agreements between the UK and the Cayman Islands on 5 November 2013, the UK, Jersey and Guernsey on 22 October 2013, and the UK and the Isle of Man on 10 October 2013.
The UK IGA largely tracks the draft Model IGA produced by the US Treasury ("US IGA") in relation to the US FATCA legislation ("US FATCA Regulations"). Most of the key terms and definitions of the US IGA are reflected in the UK IGA, including the scope of the definition of a financial institution ("FI") that will be subject to the UK IGA (and related law). An FI will include a Custodial Institution, Depository Institution, Investment Entity, or a Specified Insurance Company, which in practice will cover banks, custodians, nominees, trust companies and trusts, investment funds, administrators, managers and advisers, as well as certain insurance companies.
As the UK IGA is not based on any UK legislative equivalent to the US FATCA Regulations, the UK IGA does not include provisions dealing with or otherwise relating to withholding taxes and penalties, or registration requirements. The UK IGA does however contain similar Annexes to that of the US IGA, in relation to due diligence procedures and exemptions from application. As with the US IGA, unless they can avail of one of the exemptions FIs will be obliged to undertake prescriptive due diligence obligations for identifying reportable accounts under the UK IGA.
The UK IGA compels BVI FIs to report information annually to the BVI Financial Secretary (or a person designated by him) on financial accounts that are held by UK individuals or entities controlled by UK persons. The Financial Secretary will then forward the UK tax payer information to HM Revenue and Customs. Additionally, the UK IGA contains details of the alternative reporting regime for UK resident non-domiciled individuals.
For our prior client update on the US FATCA Regulations, please click here.
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