Under no obligation
The US Foreign Account Tax Compliance Act (FATCA) was implemented in the Bahamas in 2015 through the Bahamas and the United States of America Foreign Account Tax Compliance Agreement Act, 2015, as amended (the FATCA Act). The OECD Common Reporting Standard (the CRS) was implemented in the Bahamas in 2017 through the Automatic Exchange of Financial Account Information Act, 2016, as amended (the CRS Act) and the Automatic Exchange of Financial Account Information Regulations, 2017, as amended (the Regulations).
The underlying company
It is common practice in the Bahamas for a trust company to hold shares in one or more Bahamian companies that, in turn, hold the underlying assets of the trust. Such holding companies are generally referred to as ‘underlying companies’.
What is a trustee-documented trust?
A trustee‑documented trust (TDT) is a trust that qualifies as a financial institution (FI) whose trustee is an FI that reports all information required with respect to reportable accounts of the trust.
Registration under FATCA
Under FATCA, entities that meet the criteria of FIs are required to register with the US Internal Revenue Service (the IRS) to obtain a global intermediary identification number. They are also required to register with the Bahamas Competent Authority,[1] unless exempted by the FATCA Act. Entities that do not meet the criteria of an FI, i.e., non‑financial foreign entities (NFFEs), are not required to register with the IRS or the Bahamas Competent Authority.
Entities are exempted from the registration requirement under FATCA where they qualify as non‑reporting FIs. There are two types of non‑reporting FIs: ‘exempt beneficial owners’ and ‘deemed‑compliant foreign financial institutions’ (FFIs). TDTs are one of the categories of deemed‑compliant FFIs.[2] Further, the Bahamas FATCA guidance notes provide,[3] at para.5.10, that:
Please login to access this content
If you are not a member, find out more about joining STEP or subscribing to STEP articles.