The Isle of Man has agreed to automatically exchange tax information with the UK. Jersey and Guernsey want to make this a global initiative. The US is forcing financial centre
The Isle of Man has agreed to automatically exchange tax information with the UK. Jersey and Guernsey want to make this a global initiative. The US is forcing financial centres to automatically report on American clients. Spanish residents need to get ready to report their overseas assets to the Spanish government.
We are entering another new era in local and international efforts against tax evasion and fiscal fraud. Sharing and reporting information will play a major role. There is very little financial confidentiality left today, and it cannot be relied upon to hide income and assets from the authorities.
There have been major developments in international tax planning over the last decade. There are still more to come. Many expatriates are affected, and it is important to keep up to date with all the changes to ensure your tax planning is fully compliant and as effective as it legitimately can be.
For peace of mind ask Blevins Franks to look over your assets and how they are structured. We can advise you regarding the latest developments and how to structure your assets to minimise tax and maximise income.
The new US Foreign Account Tax Compliance Act (FATCA)
FATCA was enacted by Congress in March 2010, to fully come into effect in 2014. It aims to ensure that the US tax authorities, the Internal Revenue Service (IRS), obtains information on financial accounts held by US taxpayers anywhere in the world. Foreign Financial Institutions have to report their American clients? affairs to the IRS.
In other words, the US is attempting to force financial centres to automatically exchange tax information on US clients.
The incentive for them to do so is pretty high. If they fail to comply their revenues from US sources will suffer a 30% withholding tax.
Isle of Man?s new agreement with UK
The Isle of Man announced in December that it will enter into an automatic tax information sharing agreement with the UK, similar to the agreement it intends to sign with the US to comply with FATCA.
Once in place, it will give HM Revenue & Customs (HMRC) access to more information about potentially taxable money held in the Isle of Man.
HM Treasury Secretary David Gauke acknowledged this was a landmark agreement, saying that ?for years people said this couldn?t be done?. The government is now pressuring the other Crown Dependencies (Jersey and Guernsey) and British Overseas Territories (British Virgin and Cayman Islands), to accept similar agreements.
I would expect other countries to later expect similar agreements with offshore centres. This is why attempting to hide assets from local tax authorities is so risky ? one day, somehow, they will come to light.
Speaking to the Tynwald, the Isle of Man? legislative assembly, Chief Minister Allan Bell said that its agreement with the UK will serve to demonstrate the island?s superior level of regulation and improve growth prospects for the local economy.
This stance could well be taken by other financial jurisdictions as they aim to prove they are reputable and well regulated centres. As Bell warned, failure to meet the international standards of the world?s best regulated jurisdictions would damage the island?s economic prospects in the medium to long-term.
?The US Foreign Account Tax Compliance Act is a game changer in relation to transparency and the automatic exchange of information agenda?, he explained. ?It will be used as the lever and model by many countries for equivalent information to be provided to them.?
?Such is its reach and effect, FATCA may even overtake the proposed changes in the EU savings directive. This government considers, therefore, that automatic exchange of tax information in something like the volume and form required by the USA under FATCA will become part of the international standard. It is clear that the next two years will see massive changes in the way in which nations co-operate in the field of international taxation issues.?
He stressed that the Isle of Man can only aim to be a highly competitive jurisdiction with tax and regulatory regimes which meet international standards and are not harmful to other countries? economic or fiscal interests.
Jersey and Guernsey have held exploratory talks with the UK authorities but have so far said they will not implement anything yet. They are not against this automatic exchange of information as such, but rather want the UK to target a global adoption of the regime (as the US is doing).
In a joint statement, the islands said they share a common commitment with the UK to combat tax evasion and participate in international efforts to combat fiscal crime, and explained:
?In our ongoing discussions with the UK government we will be pressing them to make clear the steps they are taking to promote the adoption of automatic exchange of information worldwide to ensure that a level playing field is achieved for all finance centres competing in the global market place.?
For the time being, they will continue to share information with the UK on request, under the Organisation for Economic Cooperation and Development tax information exchange framework. Guernsey also shares information under the EU Savings Tax Directive.
For clarification on the latest local and international tax regulation developments, and advice on the most effective legitimate tax mitigation arrangements for you, speak to Blevins Franks which keeps fully up to date and has decades of experience advising British expatriates.
9 January 2013
The tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; an individual should take personalised advice.