By Vanessa Braithwaite

THE Government has approved a request from Finance Minister Winston Jordan to sign a reciprocal model A1 Inter-Governmental Agreement (IGA) with the United States Internal Revenue Service (IRS). According to Minister of State Joseph Harmon at this week’s post-Cabinet press briefing, the agreement will allow financial institutions in Guyana to identify and disclose details regarding the holders of dollar accounts.
The signing of this agreement is timely, as 2014 and 2015 submissions of reports are now due and should be submitted by September 30, 2016.
This submission was deterred because the agreement was not in place, though it should have been since Guyana has been regarded an inter-governmental country since 2014.
“The signing of this IGA will also allow the conclusion of the service agreement with the software provider for the installation of reporting software relating to the Foreign Accounts Tax Compliance Act (FATCA), thus bolstering Guyana’s anti- money laundering and countering financing of terrorism thrust,” Harmon said.
FATCA is a United States federal law that was enacted in March 2010 with the intent to enforce the requirement for United States citizens (including those living outside the U.S.) to file yearly reports on their non-U.S. financial accounts to the Financial Crimes Enforcement Network (FINCEN).
The Government had to choose between Model 1 or Model 2, but opted for the first. The benefits of this include the exchange of information.
The country must have in place protections and practices that are determined by the U.S. Treasury Department and the Internal Revenue Service (IRS) to be sufficiently robust to ensure that the exchanged information remains confidential and is used solely for tax purposes and the country must have in place a tax treaty or a Tax Information Exchange Agreement (TIEA) with the U.S.

Model 2 however provides only for a country reporting to the U.S. Any Foreign financial institution entering into an arrangement with the USIRS would be referred to as a Participating Foreign Financial Institution (PFFI).
PFFIs (local banks, credit unions and insurance companies) will be required to examine their existing accounts to determine who will be considered U.S. citizens, identify such new account holders, provide annual reports on them, and withhold payments to account holders who refuse to disclose relevant data.
PFFIs that do not enter into an agreement with the USIRS will be considered Non-participating Foreign Financial Institutions (NPFFIs) and therefore, PFFIs will be subject to a 30 per cent withholding tax on certain payments, including U.S. source interest and dividends, and gross proceeds from sales of U.. securities.
FACTA was enacted by Congress to target non-compliance by U.S. taxpayers using foreign accounts.