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FAROE ISLANDS AND US SIGN FATCA AGREEMENT
The Faroe Islands and the United States have signed an agreement to implement the Foreign Account Tax Compliance Act (FATCA), aiming to combat tax evasion and promote transparency in financial transactions.
Exchange of Information
Under this agreement, the Faroe Islands will exchange information with the US regarding accounts held by US persons or entities. The information to be exchanged includes:
- Names, addresses, and taxpayer identification numbers of account holders
- Account balances and values
- Types of assets held in each account
- Payments made from each account
This information will be exchanged annually, starting from 2015.
Reporting Requirements
Faroese financial institutions that have significant US customers or assets must report annually to the Faroese Competent Authority. They must also identify and report Nonparticipating Financial Institutions (NPFIs) to which they make payments.
Withholding Taxes
The agreement provides for withholding taxes on certain payments made by Faroese financial institutions to NPFIs. These institutions will be required to withhold 30% of such payments, unless the payment is exempt or reduced under the agreement.
Deemed-Compliant FFIS and Exempt Beneficial Owners
The agreement provides for deemed-compliant treatment for certain Faroese retirement plans and other entities that meet specific criteria. These entities will be treated as compliant with FATCA requirements, allowing them to avoid withholding taxes on US-source income.
Implementation Timeline
The agreement will come into effect from 2015, with reporting and exchange of information starting in 2016.
In a statement, the Faroe Islands’ government said: “This agreement demonstrates our commitment to international cooperation in tax matters and our willingness to work together with other countries to combat tax evasion.”
US authorities also welcomed the agreement, saying it would help to improve transparency and reduce tax evasion.