Published On: Mon, Sep 24th, 2012

Curacao cannot escape new IRS system

WILLEMSTAD - As of January 1, 2013, all financial institutions worldwide are obliged to provide information on American clients to the U.S. government. This obligation arises from the so-called Foreign Account Tax Compliance Act (FATCA), a tax measure of the United States, where the country wants to understand the foreign assets of its citizens.

Curaçao financial institutions that do business with the United States under the FATCA are obliged to conclude an agreement with the IRS. On this basis, the IRS annually provide information on the identity, annual income and assets of their U.S. clients.

The international financial sector is a major economic pillar. The sector accounts for 8-10 percent of the Curaçao economy and is an important source of foreign currency for Curaçao.

The IRS uses the a reversed burden of proof at the FATCA: any financial institution is deemed to have American clients, unless the contrary is made plausible. Naturally this reporting requirement provides additional costs and administrative burden for the relevant financial institutions.

To not contribute to the FATCA is not an option for financial institutions. They are in that case faced with a withholding tax of 30% on their payments received from U.S. sources. This represents a significant competitive disadvantage.

The financial institutions will have to take drastic measures in the area of their IT systems and internal control procedures in order to meet the FATCA reporting obligations. Even institutions that do not (yet) operate with American clients, cannot escape the FATCA. These institutions must prove that they don’t operate with U.S. citizens.

Questions and ambiguities about the new requirements can be addressed  addressed by the CIFA in cooperation with the Association of International Bankers (IBA) and its sister branch Curaçao CBA on Friday, September 28. Location is the auditorium of the Central Bank of Curaçao and Sint Maarten and the seminar starts at 14:30 until 17:30.

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