The United States tax code requires those who pay tax obligations to report all assets, including those held overseas. The government has passed recent laws that are intended to encourage foreign financial institutions to aid in finding U.S. taxpayers that are attempting to avoid reporting these assets.
Like any reporting requirement, these institutions can get an extension on the deadline for the report.
Financial institutions on Cayman Islands request an extension:
The United States government requires certain financial institutions within the Cayman Islands to report qualifying accounts held by United States taxpayers. The Cayman Islands Department for International Tax Cooperation recently requested and received a reporting extension. The institutions now have until July 31, 2019, to meet reporting requirements under the United States’ Foreign Account Tax Compliance Act (FATCA) for the 2018 tax year.
The Cayman Islands Department for International Tax Cooperation also recommends qualifying institutions take this time to meet any outstanding reporting obligations from 2014 through 2017.
Failure to comply with FATCA can lead to penalties:
Financial institutions that fail to comply with FATCA requirements can face a 30% withholding tax. The US government defines “foreign financial institutions” to include banks and other depository institutions, custodial institutions such as mutual funds, investment entities and certain insurance companies like those that provide annuities.
US taxpayers with accounts in Cayman Islands should use this notification as a reminder to ensure accounts are in full compliance with applicable tax laws:
Those who have yet to come into compliance with tax obligations are wise to take this opportunity to review their options. A failure to comply with applicable reporting requirements can result in stiff financial penalties. Depending on the details of the allegations, the United States government could push for jail time.