Friday 19 December 2014
Guernsey signed a Tax Information Exchange Agreement ("TIEA") with the United States in 2002. Since it was amended, in 2013, the TIEA permits the exchange of tax information, both on request and automatically.
Automatic exchange will be on the basis of the US Foreign Account Tax Compliance Act ("FATCA"), as agreed in an Inter-Governmental Agreement ("IGA") between Guernsey and the United States, which was signed in December 2013.
It is a fundamental part of both the TIEA and the IGA that information exchanged should be kept confidential and only disclosed as specifically permitted in the agreements. It is also important for both partners to an agreement to be content that each of them has in place the necessary procedures and systems to exchange information effectively, and on a timely basis, including processes to help resolve any issues that may arise.
The Internal Revenue Service ("the IRS" - the tax authority in the United States) recently undertook a thorough data safeguards and infrastructure review of the Guernsey Income Tax Office. The IRS has advised the Director of Income Tax that it is satisfied that the procedures and systems in place are sufficient to ensure that information exchanged would be kept safe and confidential and that there can be an effective exchange relationship. The IRS also provided the Guernsey Income Tax Office with detailed information on its own practices and procedures to demonstrate that the US complies with the same stringent requirements that it expects of its exchange of information partners.
Rob Gray, the Director of Income Tax, said:
"The Compliance and Investigation Unit ("CIU"), in the Income Tax Office, is given the task of administering exchange of tax information under our agreements with other jurisdictions, and that will include automatic exchange under FATCA with the US.
It is vital that all jurisdictions which exchange, often sensitive, financial information, under TIEAs, or other formal agreements, for tax purposes, can be certain that the recipient territory will keep it confidential and safe and use it only for the purposes for which it was exchanged. I know that my colleagues in CIU take this very seriously.
In addition, in order satisfy international standards, jurisdictions have to have both experienced staff and an adequate infrastructure of processes and systems in place to ensure that the exchange of information is effective in practice.
It is very pleasing, therefore, that, having carried out an in-depth, testing and thorough review of all of our procedures and systems, the IRS has given Guernsey the "stamp of approval" by formally notifying us of the adequacy of our data safeguards, and confirming that our infrastructure should ensure that we have an effective exchange relationship with the US."
Deputy Jan Kuttelwascher, Deputy Minister of Treasury and Resources Department, said:
"In the current international climate, it is vital that the world's financial centres can demonstrate that they can comply with the expectations of their international peers. For Guernsey to receive confirmation from the US, at such an early stage in the FATCA process, that it is satisfied that our tax authority already meets its stringent expectations on data safeguarding, and standards it expects from its exchange of information partners, is very satisfying and a testament to the professional approach of the staff in the Income Tax Office".