WASHINGTON – The
U.S. Department of the Treasury today published a model intergovernmental
agreement (model agreement) to implement the information reporting and
withholding tax provisions commonly known as the Foreign Account Tax Compliance
Act (FATCA). Enacted by Congress in 2010, these provisions target
non-compliance by U.S. taxpayers using foreign accounts. The model agreement
announced today was developed in consultation with France, Germany, Italy,
Spain, and the United Kingdom and marks an important step in establishing a
common approach to combatting tax evasion based on the automatic exchange of
information. These five countries, along
with the United States, will, in close cooperation with other partner countries,
the Organization for Economic Cooperation and Development, and, when
appropriate, the European Commission, work towards common reporting and due
diligence standards in support of a more global approach to effectively
combatting tax evasion while minimizing compliance burdens.
“Today’s announcement is an important milestone in our joint
efforts to combat offshore tax evasion and make our tax systems more efficient
and fair,” said Treasury Secretary Tim Geithner. “This agreement
implements FATCA in a way that is targeted and effective, while also providing
a foundation for further international coordination. We appreciate that France,
Germany, Italy, Spain and the United Kingdom were among the first jurisdictions
to join us in this important effort and we look forward to quickly concluding
bilateral agreements based on today's model.”
The model agreement follows through on the commitment
reflected in the joint statement issued with the same countries in February to
collaborate on developing an intergovernmental approach to implementing
FATCA. The model agreement is
accompanied by another joint communique with France, Germany, Italy, Spain, and
the United Kingdom, endorsing the agreement and calling for a speedy conclusion
of bilateral agreements based on the model.
There are two versions of the model agreement - a reciprocal version and a nonreciprocal version.
Both versions establish a framework for reporting by financial
institutions of certain financial account information to their respective tax
authorities, followed by automatic exchange of such information under existing
bilateral tax treaties or tax information exchange agreements. Both versions of the model agreement also
address the legal issues that had been raised in connection with FATCA, and
simplify its implementation for financial institutions.
The reciprocal version of the model also provides for the
United States to exchange information currently collected on accounts held in
U.S. financial institutions by residents of partner countries, and includes a
policy commitment to pursue regulations and support legislation that would
provide for equivalent levels of exchange by the United States. This version of the model agreement will be
available only to jurisdictions with whom the United States has in effect an income
tax treaty or tax information exchange agreement and with respect to whom the
Treasury Department and the Internal Revenue Service (IRS) have determined that
the recipient government has in place robust protections and practices to
ensure that the information remains confidential and that it is used solely for
tax purposes. The United States will
make this determination on a case by case basis.
FATCA was enacted in 2010 by Congress as part of the Hiring
Incentives to Restore Employment (HIRE) Act. FATCA requires foreign financial
institutions (FFIs) to report to the IRS information about financial accounts
held by U.S. taxpayers, or by foreign entities in which U.S. taxpayers hold a
substantial ownership interest.
The Treasury Department and the IRS will continue to work
with other governments and with businesses to implement FATCA and to achieve
maximum consistency and standardization in the technical implementation of the
agreed information exchange, including by providing more detailed guidance as necessary.
Updates and further information on FATCA can be found by
visiting the FATCA page on www.IRS.gov.