Three authors from Harney Westwood, reports that in March 2014, the British Virgin Islands Government announced that it had concluded negotiations with the US with respect to a Model 1B Intergovernmental Agreement with the United States (the IGA). The IGA (which was eventually signed on 30 June 2014) provides the framework for the implementation of the US Foreign Account Tax Compliance Act (FATCA) in the British Virgin Islands (BVI). BVI entities are not directly subject to FATCA however the IGA requires the BVI to implement legislation requiring certain BVI entities to identify and report US accounts as set out in this Guide.
The IGA requires that BVI Financial Institutions report to the BVI International Tax Authority (ITA). The ITA will automatically pass that information on to the United States Internal Revenue Service (IRS). A BVI Financial Institution that complies with the BVI laws implementing the IGA will, under US law, be “deemed compliant” with the requirements of FATCA and will not be subject to the 30 per cent withholding tax which may otherwise be applied.