On 29 July the Department of Treasury (Treasury) and Internal Revenue Service (IRS) issued Announcement 2016–27, which provides guidance on jurisdictions that are treated as if they had an Intergovernmental Agreement (IGA) in effect.
The Model 1 and Model 2 IGAs were issued in 2012 to facilitate the implementation of the Foreign Account Tax Compliance Act (FATCA). Notice 2014–43 allowed many jurisdictions that did not have a signed IGA to be treated as having an IGA in effect as long as the jurisdiction was taking steps to bring a formal IGA into force. Subsequently, Notice 2015–66 announced that Foreign Financial Institutions (FFIs) in partner jurisdictions with a signed or agreed on substance Model 1 IGA that had not entered into force as of 30 September 2015 could continue to be treated as complying with FATCA, and were not subject to withholding, as long as the partner jurisdiction continued to demonstrate its intent to bring the IGA into force and that any 2014 and 2015 reportable information was exchanged by September 30, 2016.
To date, the United States has signed IGAs with 83 jurisdictions; of which 61 have IGAs that are in force. The United States has also reached agreements on substance with 30 jurisdictions.
Starting on 1 January 2017, Treasury will be updating the IGA list and determining whether they should remove jurisdictions that have not brought an IGA into force. Accordingly, these jurisdictions will no longer be treated as if they had an IGA in effect. If a jurisdiction wants to be treated as having an IGA in effect, it must provide a detailed explanation to Treasury by 31 December 2016, and provide a step-by step plan that the jurisdiction intends to follow in order to sign the IGA and bring it into force (including expected dates). Treasury will evaluate a jurisdiction’s status based on whether the explanation and plan was submitted and if the jurisdiction shows firm resolve to put an agreement into force. If a request is not accepted by Treasury, the jurisdictions won’t cease to be treated as having an IGA in effect until at least 60 days after its status on the IGA list is updated. FFIs in such jurisdictions will likely enter into FFI agreements in order to comply with their FATCA obligations.
Foreign Financial Institutions (FFIs) in jurisdictions that are treated as having IGAs in effect have IGA specific FATCA statuses (i.e., Reporting Model 1 FFI, Reporting Model 2 FFI, Nonreporting IGA FFI) and may have previously registered for a GIIN. If Treasury does not accept a jurisdiction’s request to continue to have an IGA in effect, or if a jurisdiction fails to provide Treasury with the requested information, FFIs in these jurisdictions will no longer keep their FATCA statuses. Withholding agents should be aware that a change in FATCA status is a change in circumstance and will require withholding agents to collect updated tax forms
For Announcement 2016–27, click here (PDF, 33KB)
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.