The U.S. Treasury Department has collaborated with foreign governments to develop two alternative model intergovernmental agreements to facilitate the compliance and implementation with the provisions of FATCA in a manner that removes domestic legal impediments to compliance, fulfils FATCA’s policy objectives, and further reduces burdens on FFIs located in partner jurisdictions.
Both models (together IGA) include an Annex I, that describes the due diligence requirements and an Annex II, that includes a country-specific list of financial institutions, products and accounts that are exempt or deemed-compliant.
IGA contemplate that the partner jurisdiction will require all financial institutions that are located in that jurisdiction, and are not otherwise excepted or exempted pursuant to the agreement, to identify and report information about U.S. accounts. In consideration of the full cooperation by the partner jurisdiction, the Agreements contemplate a number of simplifications and burden reduction associated with the application of FATCA in the partner jurisdiction resulting in:
- Relaxation of deadlines
- Simplified due diligence
- Increased clarity around due diligence with country specific provisions
- No obligation to withhold or close non-consenting U.S. accounts
List of countries having signed IGAs or in the process of signing them:
Intergovernmental Agreement Model 1
Under the first model of the intergovernmental agreement (IGA Model I), FFIs in partner jurisdictions will be able to report information on U.S. account holders directly to their national tax authorities, who in turn will report to the IRS.
There are multiple versions of Model I, reciprocal and non-reciprocal as summarized in the table below.
Intergovernmental Agreement Model 2
The second model of the Intergovernmental agreement (IGA Model II) was designed to address potential conflicts of national and local laws that would make it difficult, for Financial Institutions in some jurisdictions, to comply with FATCA. Financial Institutions will report information directly to the IRS rather than to their local jurisdictions.
There is no reciprocal version of the IGA Model II.
The different templates are available for consideration according to whether the potential partner country has a Tax Information Exchange Agreement (TIEA) or Double Taxation Treaty (DTT) with the U.S.A. The most up-to-date templates can be downloaded from the Treasury website.
|IGA Model 1|
|Reciprocal agreement for jurisdictions that have signed a DTT or TIEA with the U.S.A.|
|Non-reciprocal agreement for jurisdictions that have signed a DTT or TIEA with the U.S.A.|
|Non-reciprocal agreement for jurisdictions that have not (yet) signed a DTT or TIEA with the U.S.A.|
|IGA Model 2|
|Agreement for jurisdictions that have signed a DTT or TIEA with the U.S.A.|
|Agreement for jurisdictions that have not (yet) signed a DTT or TIEA with the U.S.A.|
|Annexes to the agreements|
|Annex I to Model 1 Agreement|
|Annex I to Model 2 Agreement|
|Annex II to Model 1 Agreement|
Annex II to Model 2 Agreement