Cayman Islands’ residents with ties to the United States heard last week how the Foreign Account Tax Compliance Act, known as FATCA, may impact their lives in the coming months when they attended a special seminar on the subject, produced by Cayman Finance in conjunction with the Ministry for Financial Services. They found out that while FATCA itself was not a new tax on people with US connections, it was an improved method by which the Internal Revenue Service could collect taxes from people who should already be paying their US taxes, or at least filing their tax returns, and who may be living elsewhere.
Speaking at the event, sponsored by KPMG and Dillon Eustace, Mr. Roy McTaggart, Councillor with the Ministry for Financial Services, warned the audience that just because the US authorities had delayed the implementation of FATCA until 1st July 2014, the new legislation was still going to impact residents with US connections and such individuals ought to be paying close attention as to how they should be complying.
“You may have heard that the US Government has deferred FATCA by six months, but don’t take it as a sign that it’s not going to be implemented at all. FATCA is coming,” he confirmed.
US tax law expert Mr. Steven L. Cantor of Cantor & Webb, who gave the main presentation, explained FATCA was not a payment of tax.
“It is merely an enhanced reporting requirement to help the US government ferret out people who haven’t been following the law and paying their taxes to begin with,” he said.
To identify whether or not an individual should be paying their US taxes, it was useful to note that if they possessed a US passport, or had the right to own a US passport but had not actually ever claimed that right, then they were required to submit a tax return to the IRS. If such an individual also had a bank account or investments in businesses outside the US, or benefitted from an offshore trust, they would have to also file documents detailing these also, Mr. Cantor explained.
The IRS would also want to see declared information relating to any pension contributions made by employers, he added. Dual citizenship did not eliminate an individual from declaring their taxes, he said; however, if a US citizen married a non-US citizen and they lived abroad then the non-US citizen would not be liable to pay taxes in the US.
Mr. Cantor advised many people may be in a position where they may not be liable to pay taxes if they are overseas residents with US connections, but this would depend on how much they earned and how much money they had in their bank account; and in order to claim some of the deductions that may allow people not to be liable, they must be filing returns. Failure to file may not only make them liable to penalties for not filing but to being unable to claim those deductions and therefore liable to tax and additional penalties.
To download presentations from this event please visit www.caymanfinance.ky.