On 21 December 2012, the Irish Department of Finance announced the signature of a FATCA Inter-governmental Agreement (IGA) between Ireland and the United States.
Ireland is one of the first countries in the world to sign a FATCA IGA. To date only 5 other European countries have entered into such an agreement with the US. These countries are France, Germany, Italy, Spain and the UK.
By entering into the IGA, the Irish Revenue Commissioners have given the Irish financial services industry a significant competitive advantage over other countries which may not be able to reach the same agreement with the US because of banking secrecy laws. The benefits arising from entry into the IGA are as follows:
- Lighter Administrative and Compliance BurdenInvestment funds domiciled in Ireland can now avoid the need to enter into FATCA reporting agreements directly with the U.S. Inland Revenue Service (IRS). Instead, they will be required to register as “foreign financial institutions” (FFIs) with the Irish Revenue Commissioners. They can then report directly to the Irish Revenue authorities in respect of their US-resident unitholders/shareholders.
- Withholding Tax US withholding tax will not be imposed on income received by Irish investment funds registered as FFIs. In addition, such investment funds will not be required to withhold tax on payments they make to US-resident unitholders/shareholders.