US Senate Passed Tax Extender Bill

The Tax Extender Bill previously discussed was signed into law on the 18th March, 2010.

Invictus

Out of the night that covers me, Black as the Pit from pole to pole, I thank whatever gods may be For my unconquerable soul. In the fell clutch of circumstance I have not winced nor cried aloud. Under the bludgeonings of chance My head is bloody, but unbowed. Beyond this place of wrath and tears Looms but the Horror of the shade, And yet the menace of the years Finds, and shall find, me unafraid. It matters not how strait the gate, How charged with punishments the scroll. I am the master of my fate: I am the captain of my soul. I love this poem because it is an extraordinary motivator to everyone who is going through whatever plight you may be going through - whether in your professional or personal career. Far too often we allow others to dictate our paths professionally, or we listen to other's advice as to the decisions we should make, forgetting that the Battle of Life is no one else's but ours. While the advice of others may be helpful, we must never forget that the decisions we make and the actions we take will affect in a direct way no one else but ourselves. Be prepared to fight the battle of your life knowing that it is you and only you who can be the captain of your soul.

Tax Information Exchange Agreements ("TIEAs"): The Transition to Automatic Information Exchange

The end of banking secrecy as we know it is here. With an increase in TIEAs being signed throughout the offshore region, nation states are fostering the international co-operation needed for transparency in the global financial sector. However, with the exchange of information upon request becoming the norm, the tide has become even stronger! There has been a call for greater transparency in tax information, and therefore the creation of a system of automatic information exchange. Automatic information exchange is the process by which tax information would be exchanged in an isochronous and organised fashion between the requesting country and the requested country. The Isle of Man has made a commitment to implement a system of automatic exchange of information by July 2011. Jersey has also stated that it will commit to introducing an automatic exchange of information.

Where do we go to next? Can there be anywhere to go?

The Tax Extenders Act of 2009

US proposed legislation requires foreign financial institutions to enter into agreements with the IRS to avoid 30% withholding tax on all US-sourced income and capital payments.

On December 9, 2009, the House of Representatives ( United States ) passed the “Tax Extenders Act of 2009” (“TEA”). The Senate is currently reviewing TEA, and it is likely that the Senate will approve the contents therein. The TEA reintroduces the Foreign Account Tax Compliance Act of 2009 (“FATCA”) with certain helpful amendments. Its purpose is to prevent the avoidance of tax on income and proceeds from assets held abroad by United States ’ (“ US ”) citizens or residents. The TEA was designed to provide greater disclosure to the Internal Revenue Service (“IRS”) by foreign financial institutions in respect of assets held by them by US persons. The United States Government has concluded that many U.S. individuals looking to evade their tax obligations in the United States have sought to hide income and assets from the IRS by opening secret foreign bank accounts with foreign financial institutions. Because many of the foreign financial institutions that hold accounts on behalf of U.S. persons are outside the reach of U.S. law, US legislators have determined that the appropriate solution is to impose taxes on foreign financial institutions, many of which have substantial investments in U.S. financial assets or hold substantial U.S. financial assets for the account of others.

It is an extremely important bill and will change the way trust and financial services providers in The Bahamas conduct business in the future. Under the TEA, foreign financial institutions are required to determine which of its equity and debt holders (and certain other of its counterparties and other “account holders”) are US persons and to report this information to the IRS or otherwise be subject to a 30% withholding tax on its U.S.-source income and/or the proceeds of certain sales and other dispositions. The withholding tax could be avoided only if the foreign financial institution enters into an agreement with the Treasury or the IRS to provide information relating to US persons that directly or indirectly maintain an account at such financial institution.