10 IGAs Join ‘In Substance’ FATCA List Just Before July 1
Ten further foreign jurisdictions were included by the United States Treasury in its latest monthly list, issued on July 1, 2014, as having reached agreements in substance on June 30, 2014, on the terms of intergovernmental agreements (IGAs) under the Foreign Account Tax Compliance Act (FATCA).
Under US transitional FATCA rules, agreements reached in substance before July 1 can be treated as being in effect through to the end of 2014, as long as the IGA is signed on or before December 31, 2014. After that date, only signed IGAs will be considered to be in effect.
From June 30, Algeria, Bahrain, Cape Verde, the Dominican Republic, Haiti, Malaysia, Montenegro, and Serbia were added to the list of countries treated as having reached Model 1 IGAs in substance and to have consented to being included on such list, while Iraq, Moldova, Nicaragua and San Marino were added to the Model 2 IGA list.
Congress enacted FATCA in 2010 to target non-compliance by US taxpayers using foreign accounts. It requires US financial institutions to withhold 30 percent of certain payments made to FFIs that do not agree to identify and report information on US account holders. Foreign governments have two options for complying with FATCA: they can either permit their financial institutions (FFIs) to enter into agreements with the Internal Revenue Service (IRS), or they can themselves enter into IGAs with the US.
US Treasury has developed two alternative model IGAs. Under Model 1, FFIs report to their respective governments who then relay that information to the IRS. Under Model 2, FFIs report directly to the IRS to the extent that the account holder consents or such reporting is otherwise legally permitted, and such direct reporting is supplemented by information exchange between governments with respect to non-consenting accounts.
Source: taxnews