Frequent asked question about FACTA and CRS

The Foreign Account Tax Compliance Act (FATCA), which was passed as part of the HIRE Act, generally requires that foreign financial Institutions and certain other non-financial foreign entities report on the foreign assets held by their U.S. account holders or be subject to withholding on withholdable payments. The HIRE Act also contained legislation requiring U.S. persons to report, depending on the value, their foreign financial accounts and foreign assets.

On November 17, 2014, the Government of Barbados signed the Model 1A reciprocal Inter-governmental Agreement (IGA), with the Government of the United States of America to improve tax compliance, commonly referred to as FATCA (Foreign Account Tax Compliance Act). Under this Agreement, Barbados will automatically exchange information with the Internal Revenue Service concerning financial accounts held by Reporting Barbados Financial Institutions with respect to U.S. reportable accounts.

Under the tax law of the United States of America, you are considered a U.S. person if you are:

• A U.S. citizen (including a person born in the United States but residing in another country who has not renounced U.S. citizenship);

• A permanent resident of the United States (a Green Card holder).

• You may also be considered a U.S. person if, during the last three years, you stayed in the United States for more than 183 days.

• Corporations are also considered U.S. persons if some of their partners or owners hold a percentage equal to or greater than 10% of the entity's ownership.

If you are a U.S. person, you may be asked to complete IRS Form W-9 (Request for Taxpayer Identification Number and Certification), which will be filed with your other documents and kept on record. You will also need to give your consent to provide your personal and banking information to the IRS.

If you do not complete IRS Form W-9 or give your consent to disclose information to the IRS, you may be denied the opening of a bank account, or your existing bank accounts could be closed and this fact reported to the IRS. Otherwise, the financial institution will be required to withhold a 30% tax on those payments whose source originated in the United States.

Every financial institution in the world must identify its clients who are U.S. persons; otherwise, it will be subject to a 30% withholding if it receives payments or income from the United States as defined by the FATCA law.
 

The Common Reporting Standard (CRS), developed by the Organisation for Economic Co-operation and Development (OECD), is an international standard for the automatic exchange of financial account information for tax purposes, to which Barbados adheres under the Multilateral Competent Authority Agreement signed on 29 October 2015.

Under the CRS, reporting financial institutions in Barbados are required to obtain specified financial account information from residents of jurisdictions with which Barbados has agreed to exchange such information.

Natural persons with tax residence in a country that has agreed to exchange information with Barbados other than the US and Barbados.

Legal entities with tax residence outside of Barbados or the USA or with partners or final beneficiary with tax residence outside of Barbados and the USA.

Financial institutions in Barbados are required to identify and report financial accounts held by individuals and entities that are tax residents in a country that has agreed to exchange information with Barbados, other than the U.S. and Barbados.

Annually report information on clients subject to CRS to the BRA (Barbados Renevue Authority), in accordance with the terms established by regulation.