Tax legislation: Temple Group brainstorms the implications of FATCA

The implications of the enactment of the FATCA regulations are still ambiguous for the local financial industry despite Mauritius being a signatory since 2013. The Temple Group is reuniting industry voices this Wednesday with a view to decipher and simplify technicalities around this law.

The Temple Group, in partnership with Global Finance Mauritius (GFM), is organising this Wednesday June 24 a workshop on the Foreign Account Tax Compliance Act (FATCA). This with a view to discuss upon how Mauritius, already signatory to this law since 2013, along with the reciprocal Model 1 Intergovernmental Agreement (IGA) and a Tax Information Exchange Agreement (TIEA) with the United States (US), now has to adapt the way it does business and administrates the due diligence of any dealings with US entities.

Participating in the session are representatives from the US Administration, the nodal agencies in Mauritius, FATCA experts and industry voices. It will also be the opportunity to launch the first of a series of support flowcharts designed by Temple Consulting with input from representatives of the Mauritius Revenue Authority (MRA) and GFM members. The chart will act as a basic guide for all concerned parties and will help send a message of cohesion and uniformity from the Mauritian financial services industry.

FATCA was introduced by the US in 2010 as part of the US Hiring Incentives to Restore Employment (HIRE) Act. Its objective is to combat tax evasion by improving exchange of information between tax authorities in relation to U.S. citizens and residents who hold assets offshore. It requires financial institutions outside the US to report information on financial accounts held by their US customers to the US Tax Authorities, notably to the Internal Revenue Service (IRS).

Sarika Subdhan, director of Temple Consulting, highlights that in order to be FATCA compliant, the first step to be taken by any entity or its representative is to establish whether, for the purposes of the IGA, the entity is a financial institution. “This enables the entity to determine the extent of the obligations that it would need to undertake. Against this backdrop, Temple Group has schematised in a flowchart the classification of a financial institution based on the MRA Guidance Notes with the objective that any officer at any hierarchical level of a financial institution can easily and swiftly – based on three or four questions – readily assess whether their client or potential client should register itself, conduct due diligence, report or neither of the foregoing to meet the FATCA requirements,” explains Sarika Subdhan.

Analysing the cost factor

In so doing, Temple Group is also helping in harmonising the understanding of all parties concerned regarding the classification of a financial institution under the MRA Guidance Notes.

The immediate impact of the coming into force of the FATCA regulations, Sarika Subdhan observes, is the cost factor involved in the establishment of necessary procedures and processes internally within any organisation in order to meet its requirements. “The more so as even in the event of a nil report, a report should nonetheless be lodged with the MRA,” she says. On the possible impact of FATCA on Mauritius as a financial services centre, Sarika Subdhan rules out the issue of guilt with regards to a possible adverse effect on the competitiveness of the country as an international financial services centre. In her opinion, much on the contrary, by taking necessary steps in a timely manner, the Mauritian authorities have sustained the image of our jurisdiction as one of good and unblemished repute with a sound legal and regulatory framework and which today is one of the main criteria to be factored in the choice of an international financial services jurisdiction for the conduct of first-class business.

“We believe that the Mauritius jurisdiction is well geared with a state-of-art legal framework but it is only with time that we will have better vision of whether the relevant legal structures put into place are sufficient and are meeting the stakeholders’ expectations with respect to FATCA requirements,” states Sarika Subdhan.

The objective of the Temple Group is not to come up with recommendations but rather offer assistance to the industry. In that regard, Temple Group has come up with several measures which include inter alia, the setting up of a FATCA helpdesk to respond to queries/clarifications of any officer from the financial services sector, the introduction of compliance services related to FATCA implementation and, last but not least, the provision of FATCA training courses in the near future.