Malta latest to sign FATCA agreement

On Monday, Malta’s finance minister signed an intergovernmental agreement (IGA) with the US in a bid to ensure that the jurisdictions’ financial institutions will be ready to comply with the US Foreign Account Tax Compliance Act (FATCA).

As a result of the agreement, Malta’s tax authority will exchange information on local US investors with US tax authority the Internal Revenue Service (IRS), which will in turn share information on US financial accounts owned by Maltese citizens.

The information will be shared through local authorities, removing the need for GPs and other entities to enter into direct relationships with foreign tax authorities.

Malta follows other popular fund domiciles, Guernsey, Jersey and the Cayman Islands in signing an IGA with the US in recent weeks. However, unlike the other fund centers, Cayman’s deal does not require US-based financial institutions to share information on accounts owned by Cayman citizens.

“There is no real need for the agreement to be reciprocal given there is nothing for the US to report back to Cayman,” said one offshore lawyer speaking to PE Manager. The lawyer said that in practice a Cayman citizen is very unlikely to be using a US vehicle to hold assets.

FATCA requires foreign financial institutions (FFIs), which include non-US private equity firms with US investors, to enter into a reporting relationship with the IRS or face a 30 percent withholding tax on certain payments that travel outside the US.