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Treasury Department Releases Model Intergovernmental Agreement To Guide Foreign Financial Institutions compliance with FATCA

On Behalf of | Aug 6, 2012 | IRS, New Laws |

On July 26, 2012, the United States Department of Treasury published two versions of model intergovernmental agreements, a reciprocal and non-reciprocal. These agreements establish a framework for financial institutions to report certain financial account information to their respective tax authorities. The information will then be shared under existing bilateral treaties tax information exchange agreements or tax treaties. The reciprocal version of the model intergovernmental agreement is available only to partner countries, jurisdictions with which the U.S. has an income tax treaty or tax information exchange agreement in effect. This version not only provides a means for foreign banks to report on the assets held in their institutions by U.S. citizens, it also allows the IRS to share taxpayer information with a foreign government about its citizens’ assets held in the U.S. Congress must approve the use of the reciprocal agreement.

For the reciprocal version to be used, the Treasury Department and the IRS must already have determined that the recipient government has provisions in place to maintain confidentiality of information and that the data provided is used only for tax purposes. The agreement also includes a policy commitment to pursue regulations and support legislation to provide equivalent levels of exchange by the United States.

The nonreciprocal version of the model intergovernmental agreement governs a one-way transmission of information from the foreign country to the U.S., without receiving any data in exchange. Banks in countries that do not make arrangements with the Treasury Department will instead have to report client tax information directly to the IRS.

To read the agreements in their entirety, click here and here.


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