UK and International Tax news
Model Intergovernmental Agreement And FATCA
Thursday 9th August 2012
Following the issue of a joint statement from the US, France, Germany, Italy, Spain and the UK [FATCA partners] in February 2012 which announced an intergovernmental approach to improving international tax compliance and the implementation of FATCA, HMT has recently announced the publication of a Model Intergovernmental Agreement designed to improve tax compliance and implement FATCA.
FATCA partners had previously raised a number of issues with regard to the implementation of FATCA by FFIs established in these partner countries which may not be able to comply with the reporting, withholding and account closure requirements because of legal restrictions. The referred intergovernmental approach to FATCA implementation was to consider these legal impediments to compliance, simplify practical implementation, and reduce FFI costs.
The policy objective of FATCA is actually to achieve reporting rather than to collect withholding tax. The partner countries have agreed to explore a common approach to FATCA implementation through domestic reporting and reciprocal automatic exchange and based on existing bilateral tax treaties. The US will also reciprocate in collecting and exchanging on an automatic basis information on accounts held in US financial institutions by residents of the FATCA partners.
The Model Agreement sets out a framework which proposes to, in particular, address legal difficulties such as confidentiality and data protection, ensure that withholding tax is not inposed on UK institutions receiving income, remove withholding requirements on payments made by UK institutions, align due diligence requirements to those under existing money laundering rules, and widen the scope of institutions and products exempt from reporting under FATCA.Contact Us