The IRS and the Treasury announced on April 2 that a country which has reached an agreement in substance with the United States as to the terms of a FATCA Intergovernmental Agreement ("IGA") will be treated as having an IGA in effect through December 31, 2014, even if such IGA has not been signed.The Treasury and the IRS had previously announced that a country which had signed an IGA would be treated as having the agreement in effect, even if such IGA had not been brought into force. According to Announcement 2014-17 (linked below), a Foreign Financial Institution resident in, or organized under the laws of, a jurisdiction that is listed on the Treasury and IRS websites as having reached an agreement in substance will be permitted to register on the FATCA registration website consistent with its treatment under the relevant model IGA and will be permitted to certify its status to a withholding agent consistent with that treatment.
The Treasury announced that 26 countries to date had signed either a Model 1 or Model 2 IGA, the most recent countries being Luxembourg and Honduras. The Treasury stated that another 19 countries had reached agreement in substance on the terms of an IGA and had consented to being added to the list of countries deemed to have IGAs in place. These countries include the British Virgin Islands, Australia, Belgium, Brazil, Lichtenstein, Poland, Slovenia, South Africa and Qatar (all Model 1). The list also includes Austria, which has agreed in substance to a Model 2 form of IGA. The complete list is linked below. The Treasury also said that it anticipates adding more countries to the list as agreements in substance are reached with other jurisdictions that consent to being on the list. According to the announcement, a jurisdiction may be removed from the list of jurisdictions that are treated as having IGAs in effect if the Treasury determines that the jurisdiction is not taking necessary steps to bring the IGA into force within a reasonable period of time; and, as noted above, a jurisdiction will be removed from the list if it fails to sign the IGA by December 31, 2014. If a jurisdiction is removed from the list, FFIs that are resident in, or organized under the laws of, that jurisdiction, and branches that are located in it, will, from the first day of the month following the month of removal, no longer be entitled to the status that would be provided under the IGA, and will be required to update their status on the FATCA registration website accordingly.
The text of an agreement in substance that is treated as being in effect will not be published by the IRS or Treasury until the IGA is signed. Instead, the list will specify only whether the relevant IGA is a Model 1 or a Model 2 IGA. Until the IGA is signed, the jurisdiction will be treated as having in effect the relevant model provisions. Any deviations from the text of the Model agreements (such as those found in Annex II of the IGAs) will not be in effect until the IGA is signed.
The Treasury Announcement also gives Foreign Financial Institutions an additional 10 days to register with the IRS and ensure that they will be on the initial FFI list. The final FATCA regulations generally provide that, in order for withholding not to apply, a withholding agent must obtain an FFI's GIIN for payments made after June 30, 2014, and must confirm that the GIIN appears on the IRS FFI List. A special rule, however, provides that a withholding agent does not need to obtain a reporting Model 1 FFI's GIIN for payments made before January 1, 2015. The IRS had announced previously that FFIs must register on the FATCA registration website by April 25, 2014 (GMT-5) to ensure they are included on the first IRS FFI List, which is expected to be electronically available on June 2, 2014. The IRS has now determined that FFIs that register by May 2, 2014 will be on the June 2, 2014 FFI list, and that FFIs that register before June 3, 2014 will be on the FFI list published on July 1. Model 1 FFIs, including those with agreements in substance that are on the FFI list, will continue to have until January 1, 2015 to obtain their GIINs.
See: List of Jurisdictions That Have Signed IGAs; FATCA Update Announcement. See also: Cabinet FATCA Materials (for Cabinet subscribers only).For more information, please contact Daniel Mulcahy and Mark Howe.
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