“This allows us to work together to ensure that financial institutions here in Grenada can help us to comply with all the rules and regulations and we appreciate the government of Grenada’s cooperation in ensuring that this moves forward,” said Stephen Fharm, US Charge D’affaires at the US Embassy in Grenada.
Prime Minister Dr Keith Mitchell, after signing the document on Thursday said the signing of the agreement is a sign of Grenada’s commitment to finding solution to problems that are linked to international financing.
“If we do not bond together in coming up with solutions jointly, to deal with those problems whether it’s the issue of drugs, terrorism, whatever they are, they are all tied together and therefore we see this as a fundamental obligation of the Government to join with our partners regionally and internationally to ensure that this is taken care of,” he said.
The agreement means that the Inland Revenue Department will report to the relevant US Government Agency upon request, and provide financial information about American citizens here once its assumed that they have financial earnings that requires them to pay taxes in the US.
“Under that system we are obligated to give information through the Inland Revenue department,” said Mitchell who is also the Minister of Finance.
“It has to be a mutual thing, It’s reciprocal,” he explained.
On March 18th, 2010, the US Government enacted FATCA to combat tax evasion by specified US citizens holding investments in accounts outside of the United States, specifically as it relates to US-sourced income.
FATCA requires Foreign Financial Institutions (FFIs) to report to the US Internal Revenue Service (IRS), information on assets of US$50,000 or more held by US taxpayers, or by foreign entities in which US taxpayers hold substantial ownership interest.
On June 16th, 2014, Grenada successfully completed the negotiation of a Model 1 Inter-Government Agreement to enable FATCA compliance.
This model requires financial institutions to submit customer information to the Inland Revenue Department for onward submission to the IRS.
Mitchell said that there are US citizens living in Grenada as well as US businesses that are operating here that are liable to pay tax in the US based on existing legislation.
The “Foreign Account Tax Compliance (United States) Implementation and Enforcement Bill” provides for the legal submission of customer information for the purposes of FATCA.
Failure of a FFI to submit information could result in a 30 per cent withholding tax levied on specific income originating from sources in the US and may result in the potential loss of correspondent banking relationships.
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