United States Intergovernmental Agreement
The British Virgin Islands ("BVI") Government on 6 March 2014 initialled a "Model 1 intergovernmental agreement" (the "BVI-US IGA") with the government of the United States of America with respect to the "Foreign Account Tax Compliance Act" provisions of the Internal Revenue Code ("FATCA"), designed to address tax evasion by US citizens and other US persons. While the BVI-US IGA has not yet been formally signed and therefore the official text has not been made public, the BVI-US IGA is expected to streamline the process for BVI foreign financial institutions to comply with FATCA by reporting the required information to the BVI International Tax Authority who would then exchange information with the United States.
As a result of the above agreement, the US Internal Revenue Service, (IRS) has announced on 2 April 2014 that it will treat BVI (among other countries) as having signed a bilateral IGA. The importance of this is that BVI foreign financial institutions (such as BVI funds) now have until 1 January 2015 to register with the IRS for a Global Intermediary Identification Number (GIIN) unlike those entities from countries which have not signed IGAs, who must register by 1 July 2014. Obtaining a GIIN is significant as it means the entity is considered a Registered Deemed Compliant Foreign Financial Institution and this enables them to avoid withholding under FATCA.
United Kingdom Intergovernmental Agreement
The BVI has signed an intergovernmental automatic information exchange agreement with the United Kingdom (the "BVI-UK IGA"), modelled on the intergovernmental agreement between the United Kingdom and the United States that implements the United States FATCA legislation. Though not in force as of 28 April 2014, if implemented in accordance with its proposed terms, BVI financial institutions such as funds will be required to provide to the relevant BVI government authority (likely to be the International Tax Authority) certain information about United Kingdom resident account holders. Such information will then be automatically exchanged by the relevant BVI government authority with the United Kingdom tax authorities.
The information in the preceding paragraphs is accurate as at 28 April 2014, however is subject to change following this date as the final BVI-US IGA is signed and steps are taken in both the United States of America, the BVI and the United Kingdom to implement the BVI-US IGA and the BVI-UK IGA.
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