An update on FATCA. On 12 September 2012 the UK government signed an Inter-Governmental Agreement (or IGA) with the US government for the purposes of FATCA implementation in the UK. This is the first agreement of its kind and is broadly based on the template agreements released by the IRS in July. An IGA is intended to ease the administrative burden of FATCA compliance for non-US entities by enabling such entities to report to their own revenue authority rather than having to enter into an agreement directly with the IRS. An IGA, together with consequential amendments to local law, should also address any legal concerns that non-US entities may have in relation to FATCA compliance (eg, with respect to disclosure of information and confidentiality obligations under local law).
The Australian government has announced that it is currently exploring the feasibility of an IGA with the US. Written submissions have been sought from market participants on the advantages and disadvantages of an IGA based on the template agreements released in July. The expectation is that the New Zealand government will follow suit and seek industry input on a proposed IGA between the New Zealand and US governments. As with the UK IGA and the proposed Australian IGA, one of the more important aspects of any New Zealand IGA will be the list of entities and products to be set out in an annex to the IGA and to be entitled to concessionary FATCA treatment.
In other FATCA developments, ISDA has published a protocol to allow market participants to address the potential effect of FATCA on derivative transactions entered into under their ISDA Master Agreements. A copy of the Russell McVeagh publication discussing these developments, together with how FATCA should be addressed by New Zealand taxpayers in their ISDA documentation, is available here.