

In July 2012, the U.S. Treasury Department issued the first model for an Intergovernmental Agreement (IGA) which makes it easier for partner countries to comply with the provisions of FATCA. This IGA provides for a partnership agreement between the U.S. and a FATCA Partnership jurisdiction, namely France, Germany, Italy and Spain with the United Kingdom first to sign the IGA agreement.

Under this agreement, 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.

IGA highlights and benefits

Relaxation of deadlines

Simplified due diligence

Increased clarity around due diligence with country specific provisions

Annex II of the Model 1 IGA includes a country-specific list of financial institutions, products and accounts that are exempt or deemed compliant, thus reducing some of the remediation work for FFIs.

Reduced withholding requirements

Increased clarity around insurers

Clearer definitions with respect to pension annuities and more favorable rules applicable to new insurance contracts.

Switzerland and Japan are in negotiation with the U.S. and are expected to sign a model 2 IGA with slight variations in the agreement from Model 1.