In our Summer tax briefing it was indicated that the US Department of Treasury and the Inland Revenue Service (IRS) had issued a joint statement along with France, Germany, Italy, Spain and the UK setting out a framework for the potential establishment of intergovernmental agreements to better facilitate the implementation of FATCA. On 26 July the US Department of Treasury, following on from that initial joint statement, released two versions of the Model I Intergovernmental Agreement (Model IGA) - one dealing with reciprocal information exchange where the FATCA partner country has an existing tax treaty or tax information exchange agreement with the US and one dealing with information exchange on a non-reciprocal basis where no such agreements exist. Under the Model IGA foreign financial institutions (FFIs) in a FATCA Partner country will be able to comply with FATCA by collecting and reporting the information required to their home tax authorities rather than the IRS. Those FFIs will be "deemed FATCA compliant" and should not be subject to the 30% FATCA withholding on payments made to them.
On 12 September 2012 the UK became the first country to sign an IGA with the US to implement FATCA. This is significant in an Irish context as it is expected that Ireland will enter into a similar agreement shortly. The text of the agreement closely replicates the Model IGA published in July with the addition at Annex II of a country specific list of financial institutions and financial products to be treated as exempt or deemed compliant for FATCA purposes. Among those non-reporting UK financial institutions listed at Annex II are certain UK Governmental organisations, the Bank of England, the UK offices of certain international organisations (e.g. of the IMF, World Bank and the EC), retirement funds, non-profit organisations (e.g. registered charities), credit unions, industrial and provident societies, friendly societies, investment trust companies, etc.
As Ireland has a comprehensive tax treaty with the US containing information exchange provisions it is anticipated it will seek to "come on board" with the reciprocal Model IGA. While there is no official timetable for those discussions to be concluded, it has been reported in various quarters that the Irish tax authorities are currently discussing, with a number of representative organisations in the banking and asset management area, those financial institutions and products that should be exempt or deemed FATCA compliant under an IGA with Ireland and with a view to concluding an agreement with the US before year end. It is likely that the UK list will inform Ireland’s approach when negotiating Annex II to its proposed IGA with the US.
Once agreed it is anticipated that Irish domestic tax legislation will be amended later in the year to facilitate implementation of FATCA thereby enabling Irish funds and similar financial entities to collect and report the relevant information to the Irish tax authorities rather than direct to the IRS. The Irish tax authorities will then share this information with the IRS through the existing double taxation treaty arrangements. As indicated by the IFIA back in April a simplified standardised approach to FATCA, such as the IGA, should be very positive for the Irish funds industry.
The FATCA information reporting timeline outlined in the reciprocal Model IGA is broadly as follows:
- 30 September 2015 – limited information (e.g. owner identifying information) is to be exchanged by this date for calendar years 2013 and 2014
- 30 September 2016 – the information to be exchanged by this date for calendar year 2015 is extended to include, for example, interest or other income paid on the account concerned
- 30 September 2017 – the information to be exchanged by this date for calendar year 2016 and subsequent years is extended further still to include the reporting of gross proceeds