(stabroeknews.com) A week before the local commercial banking system is expected to become compliant with the provisions of the United States’ Foreign Account Tax Compliance Act (FATCA), Republic Bank (Guyana) Ltd has announced that it will shortly be communicating with its customers in Guyana who are expected to be affected by the provisions of the US legislation.
FATCA was enacted by the US in March 2010 as a mechanism designed to reduce the level of tax evasion which currently exists.
A statement issued by Republic Bank earlier this week said “the main purpose of FATCA is to ensure that United States persons disclose their overseas investments and pay applicable taxes on US sourced income invested overseas.”
While the statement does not go beyond articulating Republic Bank’s position, a source from another local commercial bank told Stabroek Business that Republic Bank’s disclosure essentially means that the entire banking community “which has been consulting collectively on the FATCA issue” has agreed to comply with the FATCA requirements.
The local commercial banking system is one of several across the world which the United States has persuaded to enter into agreements with that country to disclose certain information by stipulating that a 30% withholding tax will be deducted from certain payments coming from the United States of America to non-compliant financial institutions.
The Republic Bank statement said that the “importance of doing business with the United States of America without the withholding tax being applied has resulted in countries negotiating inter-governmental agreements with the US. In instances where there is no inter-governmental agreement, individual financial institutions have entered into direct agreements with the United States to facilitate compliance with FATCA.”
According to the Republic Bank statement, “the common view is that entities which do not comply with FATCA will be challenged to remain viable.”
The announcement by Republic Bank, which comes a week before the FATCA legislation is due to come into effect, now means that “persons desirous of opening accounts may be required to provide some additional information and in instances where the account holder is identified as a US person, some additional forms will be required as part of the account opening process.”
The statement adds that FATCA will affect “in particular… United States citizens and residents and some other categories of customers.”
The announcement by Republic Bank comes after more than two years of virtual silence over the position of local commercial banks on FATCA, though local banking officials had always hinted that compliance with the legislation was likely to be the course of action by local commercial banks despite many months of secretive discussions.