In July of this year, Treasury released a model intergovernmental agreement (IGA) that offered a work-around to foreign entities whose countries of residence have laws preventing the entities from complying directly with FATCA and reflected a cooperative intergovernmental approach to tackling international tax evasion. Under the reciprocal and nonreciprocal versions of the model IGA (“Model I”), in exchange for FATCA reporting to the local foreign government (with subsequent automatic exchange with the United States) and certain other reporting of payments made to nonparticipating foreign financial institutions (FFIs), an FFI would be relieved of certain requirements, such as entering an FFI agreement with the IRS, having tax withheld on payments to the FFI, withholding on payments to nonparticipating FFIs (unless the FFI acts as a Qualified Intermediary), withholding on or closing accounts of “recalcitrant” account holders and withholding on pass-thru payments or gross proceeds.
This advisory discusses Treasury’s recent announcement that the United States and the United Kingdom have signed the first Model I IGA.
The advisory is provided in PDF on the Alston & Bird website:
www.alston.com/advisories/international-tax-advisory-october-2012
