Despite reports and industry concerns that it would not happen, the U.S. Treasury Department is happily reporting that the U.S. signed intergovernmental agreements (IGAs) with the Cayman Islands and Costa Rica late last month that will facilitate the Foreign Account Tax Compliance Act (FATCA).
As many of you know, FATCA, enacted in 2010, requires firms to hunt down information on accounts held by U.S. taxpayers in other countries for the purpose of gathering unpaid revenues due to the Internal Revenue Service.
The law requires U.S. financial institutions to withhold a portion of payments made to foreign financial institutions (FFIs) that fail to identify and report taxpayer data on U.S. account holders. FFIs have two choices: they can enter into agreements with the IRS or use IGAs (available in two models) signed by their home country, according to the IRS. The IGAs with the Cayman Islands and Costa Rica, havens for many FFIs affected by FATCA, is significant.
The Cayman Islands IGA is a Model 1B agreement, which requires FFIs in the Cayman Islands to report tax information about U.S. account holders to the Cayman Islands Tax Information Authority. The authority is the only channel in the Cayman Islands that facilitates relaying tax-related data to other governments and to the IRS. The U.S. and the Cayman Islands also signed a new Tax Information Exchange Agreement (TIEA) that replaces the original TIEA the two signed in 2001.
The U.S. signed a Model 1A agreement with Costa Rica that will require the U.S. to provide tax information to the Costa Rican government regarding Costa Rican individuals with accounts in the United States, say Treasury officials.
Treasury officials say that the U.S. has signed 12 FATCA IGAs so far, and that Treasury has also reached 16 agreements “in substance and is engaged in related conversations with many more jurisdictions.”
The Treasury Department reports that 12 IGAs and the dates they were signed are:
Model 1 IGA
• Cayman Islands (11-29-2013)
• Costa Rica (11-26-2013)
• Denmark (11-19-2012)
• France (11-14-2013)
• Germany (5-31-2013)
• Ireland (1-23-2013)
• Mexico (11-19-2012)
• Norway (4-15-2013)
• Spain (5-14-2013)
• United Kingdom (9-12-2012)
Model 2 IGA
• Japan (6-11-2013)
• Switzerland (2-14-2013)
No word yet on how the FATCA IGA negotiations between the US and China are going but we’ll keep you posted.
Need a Reprint?
Leave a Reply