The IRS today released an advance version of Announcement 2016-27 as guidance to jurisdictions that are treated as if they have an intergovernmental agreement (IGA) in effect and foreign financial institutions (FFIs) located in those jurisdictions.
As of July 29, 2016, the United States has signed IGAs with 83 jurisdictions, of which 61 are in force. The United States has also reached “agreements in substance” with 30 jurisdictions.
Announcement 2016-27 [PDF 33 KB] provides that each jurisdiction that is treated as if it has an IGA in effect and that wishes to be continue to be treated as if it has an IGA in effect must provide the U.S. Treasury Department, by December 31, 2016, with a detailed explanation of why the jurisdiction has not yet brought the IGA into force and provide a step-by-step plan that the jurisdiction intends to follow in order to sign the IGA (if it has not been signed) and bring the IGA into force.
On January 1, 2017, the U.S. Treasury Department will begin updating the IGA list to provide that certain jurisdictions that have not brought their IGA into force will no longer be treated as if they have an IGA in effect. In evaluating whether a jurisdiction will continue to be treated as if it has an IGA in effect, Treasury will consider whether:
With respect to the timing of the exchange of prior year information upon entry into force of a Model 1 IGA, Treasury does not intend to find FFIs to be in significant non-compliance with the IGA as long as any information for prior years is exchanged before the next September 30th after the obligation under the IGA to exchange information has taken effect.
Today’s release states that jurisdictions that are initially determined to have demonstrated firm resolve to bring an IGA into force will not retain that status indefinitely. For example, failure to adhere to the expected timeline set out in the jurisdiction’s explanation could result in a determination that the jurisdiction is no longer demonstrating firm resolve to bring its IGA into force and therefore will no longer be treated as if it has an IGA in effect.
© 2017 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor 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. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.
KPMG's new digital platform