On November 14, 2012, the US Department of the Treasury (Treasury) published the second model intergovernmental agreement (IGA) (Model 2) for implementing the broad-ranging provisions of the Foreign Account Tax Compliance Act (FATCA), which was enacted in 2010 with the goal of diminishing tax evasion by US taxpayers.
Treasury released the first model IGA for implementing FATCA in July 2012 (Model 1) to address non-US laws that prohibited foreign financial institutions (FFIs) from complying with the reporting and withholding provisions of FATCA. The US recently executed bilateral IGAs with Denmark and the United Kingdom, both of which are based substantially on the provisions of Model 1. In addition, Treasury recently announced that it is negotiating with more than 50 countries to finalize agreements to facilitate FATCA compliance. According to Treasury, it hopes to conclude negotiations with a number of major US trading partners by the end of 2012.
Model 1 generally relies on government-to-government exchange of information to address concerns that foreign laws prohibit many FFIs from reporting account holder information to the IRS. Model 2 provides an alternative solution to these restrictions, by providing another framework to allow reporting directly to the US under FATCA.
