Cyprus FATCA agreement with US Treasury

In the coming weeks, the Cyprus FATCA agreement with the US will come into effect. It is expected that Cyprus will sign the Model 1 InterGovernmental Agreement (IGA) with the US Treasury in accordance with the provisions of the Foreign Account Tax Compliance Act (FATCA). This will undoubtedly enhance the profile of Cyprus as a transparent international business centre.

For the implementation of FATCA the US has collaborated with other governments to develop 2 model IGAs to help identify US bank accounts located outside the US. Cyprus will enter into a Model 1 IGA which requires foreign financial institutions (FFIs) located in Cyprus such as banks, insurance companies, brokers, custodians, and investment funds amongst others to report all FATCA related information to the Inland Revenue in Cyprus, which will in turn report the information to the US IRS.  

FFIs will also be obliged to pay a 30% withholding tax to the IRS on payments which relate to US sourced income and are made to an account that is held by a non-compliant account holder or a non-participating FFI. 

Penalties for non compliance with FATCA will include the imposition of a 30% withholding tax on any incoming payments related to US-sourced income.

For more information on tax matters we ask you to visit http://www.cccyprus.com/taxfirm/tax-advisory.