Effects from the Foreign Account Tax Compliance Act (or FATCA) which caused concern when
it was first announced in 2012. However, years later it is being revealed that the reporting
arrangement has placed pressure on banks such as the National Bank of the Virgin Islands.
FATCA, which is an agreement between the Government of the United States of America and
the Government of the British Virgin Islands to improve tax compliance was implemented on
23 October 2014 under the Mutual Legal Assistance (Tax Matters) Order 2014, and took effect
on 4 June 2015 via the Mutual Legal Assistance (Tax Matters) Order 2015 which provided for
the identification of financial accounts, FATCA reporting obligations, and the appointment of
third parties among other things.
In the period prior to the implementation attention and emphasis was placed on the effect
FATCA was going to have on citizens of the Territory, but little concern was spared for the
banks who were drawn into the matter.
The effects on the banks was however chronicled by the National Bank of the Virgin Islands in
a report that was tabled in the House of Assembly recently. In that report, which is for the
year 2017, the local financial institution stated that “FATCA has  created many financial and
operational pressures for regional banks.”
In explaining the pressure and issues the National Bank and other financial institutions faced
with compliance to FATCA it was stated: “The very high cost of implementation has had a
negative effect on most budgets with the costs associated with consultation, training, and
changes to policies and processes as well as advancing their core banking systems. Most
regional banks struggled to reach their initial deadlines for 2015 and this resulted in the IRS
moving the deadline outwards.”
“The pressure increased in 2016 and beyond as regional banks were required to report on all
accounts in their databases from inception to 2014 for US FATCA, while also contending with
the UK’s form of FATCA. Furthermore, it is expected that within the next two years. Other
OECD countries will introduce their own form of FATCA, known as Common Reporting
Standards (CRS), which adds another layer of complexity since banks will be required to
provide data along similar lines,” NBVI further explained.
Early FATCA Issues and Glitches
Reporting is the major aspect of the FATCA agreement, but however there were some glitches
that affect the Territory’s assistance in this regard. For instance, in 2016 the International
Tax Authority (ITA) of the Ministry of Finance had to extend the FATCA deadline to grant
additional reporting time to BVI Financial Institutions who were hindered by an issue with the
BVI Financial Account Reporting System (BVIFARS).
The early announcements of the FATCA implementation were met with skepticism here in the
Territory, especially because a number of citizens have dual citizenship and were required
therefore to adhere to FATCA. After discussions Government signed FATCA in 2014 and had a
public educational campaign on the tax agreement.
In July 2014 prior to the public education campaign it was explained that FATCA does not put
any new obligations on BV Islanders who have dual nationality and have to report to the
United States Tax Authorities.
In fact, it was stated that these obligations have always existed as part of the obligations of
being a US person. However, he announced that the BVI Government will assist persons who
need support in meeting their reporting requirements to the US by providing useful advice
and identifying professionals versed in US Tax matters to assist.