The Bahamas will be pursuing a Model I Intergovernmental Agreement under the Foreign Account Tax Compliance Act (FATCA), Guardian Business can confirm.

After a lengthy presentation last week, Cabinet approved the Ministry of Financial Services' recommendation to negotiate with the United States for The Bahamas to enter into a Model I Intergovernmental Agreement.

Minister of Financial Services Ryan Pinder said he is confident that industry stakeholders will welcome the government's decision as it provides a better sense of direction for both the government and the private sector.

"I've always said that FATCA is largely a private sector initiative with government support on how the reporting is to be inducted. Now the private sector can feel comfortable that the Government of The Bahamas has agreed under a Model I, which is a government-to-government reporting," he told Guardian Business.

"In our numerous consultations that we have had with the industry, it became evident and clear that the industry would prefer a Model I reporting, having the government act as the interface with the United States on FATCA. "We also felt from a government point of view that it allowed us to have more oversight and interaction. It protected our jurisdiction in that government-to-government relationship.

"Certainly we have Cabinet approval to pursue a Model I agreement that gives the industry some confidence and security in the direction in which we will go."

Under the Model I Intergovernmental Agreement, Pinder confirmed that his ministry was able to negotiate a number of sponsored exemptions for trusts and investment funds.

"Under the previous rules, all foreign financial institutions (FFIs) would have to register with the IRS. We felt that was unnecessary if the trust didn't have any U.S. interest. We were able to negotiate that exemption. That's very important for our trust industry," he explained.

"Likewise for investment funds in certain types of structures called feeder fund structures, we secured a similar sponsored exemption for those if the fund didn't have a U.S. interest, they would not have to register with the IRS.

"And likewise a similar sponsored exemption to one of our products called the private trust company, which is a product unique to The Bahamas likewise that would not have to register if there was no U.S. interest. So those are very important exemptions that we were able to negotiate. They are technical exemptions, but they are very important for certain products in our financial services industry that we were able to negotiate and two of those three were only found in Model I, which was significant for the industry."

"Also under the model I agreement, the timelines of implementation are more phased in and causing for more of a transition into FATCA than model II so both from the government side and the private sector side I'm sure that's preferred and also there were certain exemptions that we were able to negotiate in the area of trusts and funds."

"Some of those exemptions are only available in Model I, so those were the primary reasons Cabinet considered in making the decision to pursue a Model I Intergovernmental Agreement."

Pinder also confirmed plans to create an inter-agency and inter-ministerial committee that will chart the course for implementation, which will "ultimately" be appointed by the prime minister based on suggestions from the Ministry of Financial Services.

"This is one of the most significant policy initiatives that the Ministry of Financial Services has had to address within the last year with respect to the financial services industry," he added.

"FATCA was a huge undertaking; one to get a complete understanding, proper consultation with industry, to have dialogue with the United States, and then to be in a position to make a recommendation to Cabinet. It's really been one of the primary policy initiatives for my ministry."

FATCA was ratified in 2010 by the United States in an effort to encourage non-U.S. entities to report American investors and their counterparts to the Internal Revenue Service (IRS) by imposing a 30 percent withholding tax on U.S. source payments to non-cooperative foreign bodies.

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