Irish Finance Minister, Michael Noonan, has confirmed that negotiations with the US in relation to a new inter-governmental agreement ("IGA") have now been concluded, and as a result Ireland will be one of the first jurisdictions to enter into a new IGA with the US to implement the Foreign Account Tax Compliance Act (“FATCA”). These bilateral agreements will aid the US in tackling tax evasion and improving international tax compliance.
It is anticipated that, under the Ireland-US IGA, Irish financial institutions will be able to avoid the need to enter an individual agreement with the IRS and instead will be able to report directly to the Irish Revenue Commissioners in relation to financial accounts held in Irish financial institutions by US persons. The Irish Revenue Commissioners will then share this information with the IRS under the existing double tax treaty arrangements.
Ireland’s early agreement with the US on FATCA will allow Irish financial institutions to avoid the need for US withholding tax being imposed on US source payments to them. The IGA will ensure that the Irish financial services industry remains highly competitive internationally and is likely to represent a competitive advantage over those jurisdictions which have not yet reached such an agreement or are unwilling or unable to do so as the compliance burden and withholding tax risk will be reduced. Enabling provisions for the Irish tax code application of the IGA will be contained in the Finance Bill which is expected to be released in early February 2013.