First Friday FATCA Update

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April 7, 2017

Since our last monthly FATCA update, we have addressed the following recent FATCA developments:

  • The IRS updated the list of countries subject to bank interest reporting requirements (see prior coverage).
  • The IRS released new FATCA FAQs addressing date of birth and foreign TIN requirements for withholding certificates (see prior coverage).
  • The IRS extended the deadline for submitting qualified intermediary agreements and certain other withholding agreements from March 31, 2017 to May 31, 2017 (see prior coverage).

Recently, the IRS released the Competent Authority Agreement (CAA) implementing the Model 1B Intergovernmental Agreement (IGA) between the United States and the Bahamas entered into on November 3, 2014.

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.

A CAA is a bilateral agreement between the United States and the treaty partner to clarify or interpret treaty provisions.  A CAA implementing an IGA typically establishes and prescribes the rules and procedures necessary to implement certain provisions in the IGA and the Tax Information Exchange Agreement, if applicable.  Specific topics include registration of the treaty partner’s financial institutions, time and manner of exchange of information, remediation and enforcement, confidentiality and data safeguards, and cost allocation.  Generally, a CAA becomes operative on the later of (1) the date the IGA enters into force, or (2) the date the CAA is signed by the competent authorities of the United States and the treaty partner.

The Treasury Department website publishes IGAs, and the IRS publishes their implementing CAAs.