Saint Kitts and Nevis Governments Sign IGAAgreement to Facilitate Compliance with US Tax Laws

The governments of Saint Kitts and Nevis have taken a crucial step in ensuring the compliance of small financial institutions in the federation with the United States’ Foreign Account Tax Compliance Act (FATCA). On August 31st, Prime Minister Dr Timothy Harris and US Ambassador Extraordinary and Plenipotentiary Dr Larry Leon Palmer signed an InterGovernmental Agreement (IGA) that will facilitate the exchange of information between Saint Kitts and Nevis and the United States.

Understanding the IGA

The IGA is based on the USA’s Model 1B Agreement, which requires financial institutions in Saint Kitts and Nevis to report information on US persons’ income from financial assets held outside of the USA to the Government of Saint Kitts and Nevis’ Competent Authority. The Competent Authority will then submit this information to the US Internal Revenue Service (IRS).

Benefits of the IGA

The signing of this IGA has several benefits, including:

• Improved international tax compliance: The exchange of information between Saint Kitts and Nevis and the United States will help prevent financial institutions from facing severe penalties, including a 30% withholding tax on payments originating in the USA.
• Prevention of penalties: Small financial institutions in Saint Kitts and Nevis will no longer face potential penalties for non-compliance with US tax laws.
• Retention of correspondent banking relationships: The IGA will help prevent financial institutions from losing correspondent banking relationships, which are essential for their operations.

Background on FATCA

FATCA was enacted as part of the US Hiring Incentives to Restore Employment Act in March 2010. The law requires foreign financial institutions (FFIs) to identify and report information on assets held by US taxpayers, with a value of $50,000 or more. Failure to comply can result in severe consequences for financial institutions.

Next Steps

The information exchange under the IGA is expected to begin by September 30th. Financial institutions in Saint Kitts and Nevis will need to take steps to ensure compliance with US tax laws, including reporting information on US persons’ income from financial assets held outside of the USA.

More information on FATCA and the IGA can be obtained by visiting the following websites: www.mof.gov.kn, www.fsrc.kn, and www.nevisfsrc.com.