Seychelles to sign inter-governmental accord under Foreign Account Tax Compliance Act (Fatca) |12 December 2014

• Financial institutions urged to register with revenue service for Fatca purposes before end of December 2014

As the government prepares itself to sign an agreement under the Foreign Account Tax Compliance Act (Fatca), financial institutions are being called upon to register with the Internal Revenue Service (IRS) for Fatca purposes.

In April 2014, the government of Seychelles approved a proposal from the Ministry of Finance, Trade and Investment for Seychelles to join the Fatca. The overall aim of Fatca is to combat tax evasion by improving exchange of information between tax authorities in relation to United States citizens and residents who hold assets off-shore.

Fatca obliges all US paying agents to withhold tax of 30% from payments of  US source income that are made to any non-US financial institution unless that institution has entered into an agreement with the United States’ IRS to directly report certain information on account holders who are US persons.

Seychelles has decided to adopt a model 1 B Intergovernmental Agreement (‘IGA’) under Fatca which means the Seychelles Revenue Commission will collect the information from the finacial institutions and exchange it with the IRS, annually.

By agreeing to enter into an IGA under Fatca, the Seychelles government has prevented Seychelles’ financial institutions from being subject to the 30% withholding tax on their US source income and gross proceeds from the sale of a US security. Seychelles is currently included on the IRS list as having reached an agreement in substance.

Financial institutions that are resident in, or organised under the laws of, or are a branch located in, a jurisdiction that is included on the IRS list as having reached an agreement in substance are permitted to register on the Fatca registration website consistent with their treatment under the relevant model IGA, and are permitted to certify their Fatca status to withholding agents consistent with that treatment.

The IRS has developed a registration portal and details of the registration process are set out in the IRS user guide which is available at http://www.irs.gov/Businesses/Corporations/FATCA-Registration
For the purposes of Fatca, a financial institution is defined as:

• a Custodial Institution -- defined as any entity that holds as a substantial portion of its business, financial assets for the account of others;

• a Depository Institution -- defined as any person that accept deposits in the ordinary course of a banking or similar business;

• an Investment Entity -- an entity that primarily conducts as a business, or is managed by an entity that conducts as a business, for or on behalf of a customer (e.g. an account holder).

• a Specified Insurance Company -- an insurance company is a Specified Insurance Company when the products written by the company are classified as Cash Value Insurance or Annuity Contracts or if payments are made with respect to such contracts.

An entity may fall within more than one category of financial institution.

It is important to note that the above definitions are simplified versions of the published definitions.

Once registered, a financial institution will be issued a Global Intermediary Identification Number (GIIN) and will be included on a published list available on the IRS website. The GIIN may be used by a financial institution to identify itself to withholding agents and to tax administrations for Fatca purposes.

Financial institutions that do not comply with Fatca requirements will be subject to a 30% withholding tax. Additionally those non-participating financial institutions may suffer other practical consequences, such as refusal by other global financial institutions to do business with them.

More information can be obtained by contacting Angelique Antat from the Ministry of Finance, Trade and Investment, on +248 4382079 or angelique.antat@finance.gov.sc.