Argentina Reported To Begin Negotiating IGA With United States

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June 27, 2016

In the next few weeks, Argentina’s Federal Administration of Public Revenue (AFIP) will begin negotiating an intergovernmental agreement (IGA) with the U.S. Treasury Department to ease compliance with the Foreign Account Tax Compliance Act (“FATCA”), according to La Nacion. Neither AFIP nor the U.S. Treasury or the IRS, however, has announced possible negotiations. Argentina and Russia are the only two individual countries in the G20 that have yet to enter into IGAs with the United States. Many banks operating in Argentina registered with the IRS as participating FFIs to avoid mandatory 30% withholding on payments of U.S. source FDAP income that they receive. The lack of an IGA complicates compliance because the Argentinian bank secrecy and privacy laws conflict with the disclosure requirements of FATCA. The banks sought to avoid violating such laws by seeking consent from U.S. account holders to disclose the information required by FATCA.

Under FATCA, IGAs come in two forms: Model 1 or Model 2. Under a Model 1 IGA, the foreign treaty partner agrees to collect information of U.S. accountholders in foreign financial institutions (FFIs) operating within its jurisdiction and transmit the information to the IRS. Model 1 IGAs are drafted as either reciprocal (Model 1A) agreements or nonreciprocal (Model 1B) agreements. By contrast, Model 2 IGAs are issued in only a nonreciprocal format and require FFIs to report information directly to the IRS. The report in La Nacion does not indicate which model Argentina plans to seek, but suggests that they may seek to put in place a Model 1A agreement that would allow for the exchange of information on Argentinian citizens with accounts in U.S. financial institutions.