The Cayman Islands Financial Services Minister, Wayne Panton signed an agreement with the United States which will allow Cayman Island financial institutions to provide full disclosure of US assets held in the Cayman Islands by US persons and US entities. The agreement, based on a Model 1 intergovernmental agreement, allows for the exchange of information between the governments ensuring transparency and exchange of information for tax purposes.
The Agreement signed, Friday November 29, 2013, puts the Cayman Islands on track with the U.S. Foreign Account Tax Compliance Act (FATCA), which became law in the U.S. in 2010, and will be fully effective in 2014. While a mutual legal assistance treaty had been in place since 2001, local law made full disclosure by local financial institutions difficult.
Aimed at non-compliance by U.S. taxpayers with foreign accounts, FATCA requires foreign financial institutions to report about financial account held by U.S. taxpayers, or foreign entities in which U.S. taxpayers hold a substantial ownership interest. FATCA imposed a 30% withholding tax on certain payments, interest or dividends paid by a U.S. corporation or the proceeds from the sale of shares, made to foreign financial institutions that refused to identify U.S. account holders.