In late July, the U.S. Treasury Department released two model agreements for government-to-government sharing under the Foreign Account Tax Compliance Act (FATCA).
Under the terms of FATCA, foreign financial institutions are required to report directly to the IRS on financial accounts held by US taxpayers. The model agreements, entered into between the U.S. and the governments of France, Germany, Italy, Spain, and the United Kingdom, will help meet that requirement.
For your reference, three takeaways:
1. There are two versions:
“The model agreements were released in two versions: a reciprocal version and a non-reciprocal version. Under the reciprocal version, the IRS will collect and exchange information on certain accounts that are held with U.S. financial institutions by residents of the FATCA Partner. This version also includes a commitment by the U.S. government to pursue regulations and support legislation that would achieve the proper levels of automatic exchange. The IRS will not be obligated to transmit information to the FATCA Partner under the non-reciprocal version.” (Treasury Releases FATCA Intergovernmental Model Agreements by Morrison & Foerster LLP)
2. There’s more to come:
“These countries, along with the U.S., will, in close cooperation with other partner countries, the Organization for Economic Cooperation and Development, and, when appropriate, the European Commission, work toward common reporting and due diligence standards in support of a more global approach to effectively combatting tax evasion while minimizing compliance burdens. Treasury indicated that this is a joint effort to combat offshore tax evasion and that ‘this agreement implements FATCA in a way that is targeted and effective, while also providing a foundation for further international coordination.’” (U.S. Department of Treasury Publishes FATCA Intergovernmental Model Agreement by Akerman Senterfitt)
3. Insurance companies in particular will benefit from the new agreements:
“For insurance companies that are FFIs, the model IGAs provide an exclusion from the definition of cash value insurance contract for life insurance contracts with a cash value of $50,000 or less, but they do not extend the exclusion to low-value annuity contracts. Excluded from the definition of a ‘financial account’ for FATCA purposes will be IGA-identified FATCA- partner pension and savings plans. Together, these exclusions will reduce the administrative burdens and costs of insurer FFIs.” (FATCA G-5 Model Intergovernmental Information Sharing Agreements Released, with Substantial Benefits for Insurance Company FFIs (Including Reduced Due Diligence Burdens) by Sutherland Asbill & Brennan LLP)
Find additional tax law updates on JD Supra»