Treasury releases model intergovernmental agreement for implementing FATCA

Global Information Reporting
& Withholding Newsbrief

On July 26, 2012, the U.S. Department of Treasury (Treasury) as well as the Treasury Departments of France, Germany, Italy, Spain, and United Kingdom (the G5 countries) released a model intergovernmental agreement (the Model Agreement or Model IGA) for implementing the broad-ranging provisions of the Foreign Account Tax Compliance Act (FATCA). FATCA was enacted, as part of the Hiring Incentives to Restore Employment Act of 2010, with the goal of diminishing tax evasion by U.S. taxpayers with direct and indirect ownership in non-U.S. financial accounts.

The Model Agreement is part of the U.S. Treasury's continued efforts to implement FATCA, which requires foreign financial institutions (FFIs) to report foreign accounts owned either directly or indirectly by U.S. persons to the Internal Revenue Service (the IRS). To the extent an FFI does not comply with these provisions or an account holder does not provide the appropriate documentation, FATCA imposes a 30-percent withholding tax on payments made to either the FFI or account holder.

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