On 4 April 2013, the Government of the British Virgin Islands (the "BVI") announced that it would opt for and will be finalising a Model 1B intergovernmental agreement ("IGA") with the US in relation to the US Foreign Account Tax Compliance Act ("FATCA").  FATCA became effective in the US earlier this year and foreign financial institutions ("FFIs") in every jurisdiction, including those domiciled in the BVI, will be required to make certain reports to the US Internal Revenue Service (the "US IRS"). 

The decision is good news for users of BVI vehicles as a Model 1B IGA will simplify FATCA compliance for a range of BVI vehicles that fall within its scope, such as hedge funds and private equity funds.  Model 1B is a variation of Model 1 and is not reciprocal, as with the Model 1A (i.e. the US does not report information to the foreign jurisdiction).  The IGA is essentially a tax information agreement that provides the framework for information exchange between the Government of the BVI and the US IRS.  Pursuant to the Model 1B IGA, entities domiciled in the BVI which are classified as FFIs will usually not be required to sign an agreement with the US IRS but instead report to a competent authority within the BVI who will then disclose the requisite information to the US IRS under the terms of the IGA.  The Government of the BVI has also announced its intention to conclude negotiations with respect to similar information sharing arrangements with the UK.

In terms of ensuring that the BVI continues to make compliance with international standards and principles a top priority, the new IGA, once concluded, will join the 23 tax exchange agreements concluded by the BVI to date with various countries, including the US.  The BVI has also implemented the European Union Tax Savings Directive, which has been in place since 1995.

BVI Government Announcement

Speaking at a sitting of the House of Assembly on 4 April 2013, the Premier and Minister for Finance, Dr. D. Orlando Smith stated that, "After fully analysing the nature, scope and contents of the US Foreign Account Tax Compliance Act (FATCA) and the United Kingdom's version of the same (referred to as "UK FATCA"), I am pleased to announce that the Government of the BVI has decided that in concert with concluding negotiations leading to an agreement with respect to the UK FATCA, as a matter of priority, we will pursue the finalisation of the Model 1B Intergovernmental Agreement with the United States.  We have been in active discussions with the United States Treasury on this matter for some time now and will continue to move ahead to bring this matter to resolution as soon as it is possible for us to do so..."

Background on IGAs

On 26 July 2012, the US, in conjunction with France, Germany Italy, Spain and the UK, released a framework for improved tax compliance and FATCA implementation in the form of a model IGA.

IGAs are intended to provide a framework to collect and send information from financial institutions located in the relevant country to their own tax reporting authority, which allow them to be exempt from or have reduced obligations for FATCA reporting.

On 14 September 2012, the UK became the first country to sign an IGA with the US.  Since then, Denmark, Mexico and Ireland have also entered into an IGA with the US in November and December 2012, respectively.  The type of IGA that this group executed became known as the "Model 1 IGA".  

The US Treasury released the second Model IGA for Cooperation to Facilitate the Implementation of FATCA ("Model 2 IGA") on 14 November 2012.  Whilst the definitions are substantially similar to those in the Model 1 IGA, the Model 2 IGA relies on the FATCA regulations in many instances and addresses compliance in a different manner.  Switzerland remains the only country to have signed a Model 2 IGA, which will still require relevant financial institutions to sign up to individual agreements with the US IRS.


It is expected that the negotiations between the BVI and the US to implement the Model 1B IGA and the UK version will be concluded in the very near future.

Action Points

BVI entities which qualify as FFIs should check in with their primary adviser on FATCA as to the implications of the entry into a Model 2 IGA between the BVI and US to ensure that they are prepared for fulfilling their reporting obligations, if any.

A BVI/US Model 1B IGA should avoid the need for significant numbers of BVI entities to sign individual agreements with the IRS during 2013.  We expect that FFIs however will still need to register for a single ID called the Global Intermediary Identification Number by 25 October 2013.

For BVI domiciled fund clients in particular, where many funds look to delegate the FATCA compliance to their administrator and will be relying on their administrator's processes and systems to ensure compliance, it is also recommended that the relevant funds' administrator is contacted to ensure that the anticipated BVI Model 1 IGA equivalent is factored into the FATCA planning for those funds.

Similarly, a BVI/UK Model 1B IGA should assist in relation to any reporting obligations otherwise required or anticipated between relevant BVI entities and the UK Inland Revenue.  BVI entities qualifying as the UK equivalent of FFIs should check in with their primary adviser and, where appropriate, their administrator.

Maples and Calder's view

Maples and Calder is heavily involved in the consultation process in relation to FATCA, participating through its involvement in the Financial Services Business Development Committee and through its membership in the Securities and Investment Business Act Advisory Committee.

Maples and Calder welcomes the decisions of the BVI Government and views it as yet another step taken in the right direction to continue to maintain the transparency, attractiveness and competitive advantage of the jurisdiction.

For further information, please speak to your usual Maples and Calder contact or one of the individuals listed above.



Richard May

Managing Partner

+1 284 852 3027


Philip Ireland


+971 4 360 4073


Michael Gagie

Managing Partner

+65 6922 8402


Matthew Gilbert


+44 20 7466 1608


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