Banks to report FATCA information to TAJ
McPherse Thompson, Assistant Editor - Business
Jamaican banks and other financial institutions affected by the US Foreign Account Tax Compliance Act (FATCA) will have to bear the cost to implement the programme, says the Jamaica Bankers Association (JBA).
"Though no formal research has been undertaken by the JBA to ascertain the cost implications for its members to implement their FATCA programmes, it would be fair to say that the costs involved are in the millions," said Executive Director Richard Murray.
The costs include reporting systems to Tax Administration Jamaica (TAJ), and consultants such as tax experts and lawyers to provide guidance in developing the FATCA framework.
"When institutions first became aware of FATCA, it was a relatively new legislation and you would therefore appreciate that the knowledge base on the subject then, and to a lesser extent now, would not have been extensive," Murray told the Financial Gleaner.
TAJ is the designated 'central authority' to which financial houses will transmit FATCA reports, and which, in turn, will report the data to the US Internal Revenue Service.
Murray noted that the signing of an intergovernmental agreement (IGA) between Jamaica and the United States has assisted with easing some of the requirements by the financial institutions.
However, other cost components arose from reviewing existing systems, policies and procedures; making changes to core systems or acquiring new systems; amending account opening documentation; developing FATCA-related policies and procedures; staff training and recruitment; and keeping customers abreast of developments through correspondence and signage.
National Commercial Bank Jamaica, for example, said in a notice to its customers on its website that changes would be made to its account opening procedures, effective July 1, 2014, to align with FATCA and the inter-governmental agreement.
"Further, we may be required to contact you in order to update your records," the bank said.
Murray said the JBA was not in a position to say the number of local accounts that fall under FATCA.
The United States passed FATCA 2010 requiring all foreign financial institutions to identify and report on customers who are "specified US persons", whether or not they are the primary account holders, as well as "recalcitrant customers".
In May this year, the Jamaican and US governments signed a reciprocal IGA providing for local financial institutions to transmit the required information to the minister of finance or his delegate - the TAJ - which will, in turn, submit the information to the IRS.
Information to be reported to the TAJ includes the name, address, and US tax identification number of each specified US person/ recalcitrant customer; account number; account balance/value at the end of the calendar year or immediately before closure if the account was closed during the calendar year; gross interest/ dividends; and interest and other income credited to the account.
The tax compliance arrangement will "enter into force on the date of Jamaica's written notification to the United States that Jamaica has completed its necessary internal procedures for entry into force of this agreement," according to the IGA.
The JBA redirected queries about the internal procedures that remain to be completed, the status of those procedures and when they are expected to be completed, and to the Ministry of Finance, which so far has not responded to Financial Gleaner queries about the matter.
The AGA stipulates that it shall terminate on September 30, 2015 if Article 2 relating to the exchange of information is not in effect for either Jamaica or the United States by that date.