FATCA Background
The Foreign Account Tax Compliance Act (FATCA) was enacted by the United States of America on March 18, 2010 as part of the U.S. Hiring Incentives to Restore Employment (HIRE) Act. FATCA is geared towards combating tax evasion by U.S. taxpayers holding assets in non-U.S. financial accounts and institutions.
FATCA requires Foreign Financial Institutions (FFIs) to report to the U.S. Internal Revenue Service (IRS) information on assets held by U.S. taxpayers, or by foreign entities in which U.S. taxpayers hold a substantial (greater than 10%) ownership interest. Where an FFI chooses not to comply with FATCA, the IRS will impose a 30% withholding tax on payments to the FFI and on behalf of its customers.
Entities required to report: non-U.S. financial institutions that accept deposits or hold financial assets on behalf of others.
Who Is Affected
A person is generally treated as a “U.S. Person” for FATCA purposes if they are a U.S. citizen or dual citizen, a U.S. resident or green card holder, otherwise meet the U.S. definition of a tax resident, or are a U.S. corporation, partnership, estate or trust. A Foreign Financial Institution (FFI) is broadly any non-U.S. institution that accepts deposits, holds financial assets on behalf of others, invests or trades in securities for others, or is an insurance company issuing contracts with an investment component, covering banks, trusts, funds, and similar entities.
Under FATCA, an FFI must report offshore accounts or assets held by a U.S. person once their value exceeds US$50,000, and accounts held by a foreign entity where a U.S. taxpayer holds more than 10% ownership once the value exceeds US$250,000. Certain entities may be exempt from reporting, including foreign governments, international organizations, central banks, some pension funds, and small local institutions with low-value accounts.
St. Kitts and Nevis’ FATCA Agreement
The Government of St. Kitts and Nevis signed a Model 1B Intergovernmental Agreement (IGA) with the United States on August 31, 2015. Under this agreement, Financial Institutions in the Federation that are registered with the IRS for FATCA purposes report account information to a national Competent Authority, which in turn transmits it to the IRS. For St. Kitts and Nevis, the Competent Authority is the Financial Secretary, with the Comptroller of Inland Revenue serving as Competent Authority Designate.
Financial Institutions enrol and submit information electronically through the St. Kitts and Nevis FATCA Portal, administered by the Inland Revenue Department. Enrolment is a one-time process; there is no requirement to file if an institution has nothing to report, though a Nil Report can still be submitted for those who wish to.
Enrolment, Reporting and Further Information
Full guidance, including detailed FAQs for individuals and Financial Institutions, the FATCA enrolment form, the reporting portal, and downloadable guides, is maintained by the Inland Revenue Department, the agency responsible for administering FATCA compliance in St. Kitts and Nevis.
Visit the Inland Revenue Department’s FATCA page
FATCA-related enquiries can also be directed to the Competent Authority Designate at (869) 465-8485 or by email at fatca@sknird.com.