Intergovernmental Agreement Model I
In July 2012, the United Stated Treasury Department issued the first model for Intergovernmental Agreement (IGA), which makes it easier for partner countries to comply with the provisions of FATCA. The IGA provides for a partnership agreement between the United States and a FATCA Partnership jurisdiction, namely Spain, Italy, France, and Germany with the UK first to sign the IGA agreement. Under this agreement, FFIs in partner jurisdiction will be able to report information on United States account holders directly to their national tax authorities, who in turn will be able to report to the IRS. IGA highlights and benefits:
- Increased clarity around due diligence with country specific provisions
- Relaxation of deadlines
- Simplified due diligence
Annex II if Model 1 IGA will include a country-specific list of financial institutions, accounts and products, which are deemed or exempt compliant, thus reducing some of the remediation work FFIs.
- Clearer definitions with respect to pension annuities and more favorable rules applicable to new insurance contracts
- Reduced withholding requirements
- Increased clarity around insurers
Intergovernmental Agreement Model II
On November 15, 2012, the Untied States Treasury Department issued the second model fo the Intergovernmental Agreement (IGA) for complying with the FATCA provisions. The Model II IGA reflects the framework, which was described in the joint statements by U.S. And Switzerland and U.S. Japan earlier in 2012. Model II IGA was designed to address potential conflicts of local and national laws would make it difficult, for Financial Institutions in some jurisdictions, to comply with FATCA. The most notable differences between between Model I and Model II IGA’s
- There is no reciprocal version of the Model II IGA.
- In Model II financial institutions will report information directly to the IRS instead of their local jurisdictions