April push fails to deliver fully signed IGAs for Fatca
Despite a push to obtain agreements with foreign governments through April, the US Treasury’s own website notes the large number of outstanding Intergovernmental Agreements yet to be implemented fully around the Foreign Account Tax Compliance Act (Fatca).
So-called IGAs are critical for the success of the US Foreign Account Tax Compliance Act (Fatca). Without agreements with foreign governments US tax authorities will not be able to obtain the relevant data on US taxpayers meant to be delivered by foreign financial institutions (FFIs).
Agreements via IGAs are reqiured in order to bypass what are often tough restrictions on finanical institutions handing over customer data to third parties, including the US government.
According to the latest tables published by the US Department of the Treasury, which is responsible for negotiating IGAs, despite a flurry of activity in April, there are still a large number of jurisdictions outstanding that have not yet formally concluded an IGA. The negotiations to obtain IGAs have been ongoing for some time; for example, while the UK signed its IGA with the US as far back as September 2012, it has taken until just the past week for Hong Kong to even reach an in-principle agreement. However, there is still no word on when mainland China will sign an IGA.
Russia does not currently look like a counterparty with which the US Treasury could negotiate easily, and India’s in-principle agreement was signed shortly before elections, which polls predict will result in a new ruling coalition.
There are currently two IGA models being implemented. Model 1 effectively sees local tax authorities collect and forward on to the US Internal Revenue Service (tax authority) the relevant data; Model 2 allows FFIs to report directly to the US IRS.