With effect from 22 April, 2014, Cyprus was added to the Foreign Account Tax Compliance Act (“FATCA”) list, as a jurisdiction that has reached an Intergovernmental Agreement (IGA) “in substance”, with the US Department of Treasury, in the form of Model 1 IGA and consented to being included on the FATCA list. Effectively, this enhances Cyprus’ profile as a transparent International Business Centre.
FATCA is a US tax law aiming to target and prevent cross-border tax evasion by US citizens and residents using offshore bank accounts. It is targeted at non-US financial institutions and other financial intermediaries and imposes certain due diligence, reporting and withholding duties on foreign entities receiving specific income from US sources. Non-compliance with FATCA obligations could result in penalties in the form of a 30% withholding tax on specific payments relating to income sourced in the US.