8 September 2015
Foreign Account Tax Compliance Act (FATCA), which became law in 2010 in the United States, is important achievement in U.S. efforts to cope with tax evasion by U.S. taxpayers having their accounts and other financial assets outside of the U.S. (or in other words, offshore financial assets). The objective of FATCA is reporting of foreign financial assets; withholding is the cost of not reporting.
The following entities are involved into the FATCA-reporting: U.S. taxpayers, U.S. financial institutions, foreign financial institutions. At the level of jurisdictions, the reporting is facilitated by Intergovernmental Agreements (IGAs).
For now, almost all European countries have signed IGAs or have their financial institutions registered with the tax authority of the United States - the Internal Revenue Service (IRS).
FATCA has significantly influenced International automatic information exchange on financial accounts: most of the FATCA's reporting principles are used in the automatic information exchange.
FATCA defines two reporting information flows:
FATCA requires certain U.S. taxpayers who hold foreign financial assets (for example, deposit and custodial accounts) with an aggregate value of more than the reporting threshold (at least $50,000) to report information about those assets on Form 8938. The form must be attached to the taxpayer’s annual income tax return. The reporting threshold is higher for married couples and taxpayers living abroad.
U.S. financial institutions are required to withhold 30% on certain U.S. source payments made to foreign entities, if they are unable to document such entities for purposes of FATCA.
In terms of FATCA, Foreign Financial Institutions (FFIs) are
FATCA exempts many categories of FFIs from the requirement to register and report, for example:
According to FATCA, a FFI may register with the IRS and to agree to report to the IRS certain information about their accounts of U.S. taxpayers.
FFIs that enter into an agreement with the IRS to report on their account holders may be required to withhold 30% on certain payments to foreign payees if such payees do not comply with FATCA.
If a FFI, which is not exempt from FATCA, does not both register and agree to report, it will face a 30% withholding tax on certain payments from the U.S made to this FFI.
If according to its local regulations a FFI can't report U.S. accounts or withhold tax, this FFI still should register with IRS as a limited FFI which means that although this FFI can't comply with the terms of an FFI Agreementthe FFI is agreeing to satisfy certain obligations.
FATCA defines the following withholding actions:
To remove local legal obstacles, which prevent FFIs from participating in FATCA, the United States collaborated with other governments to develop two models of intergovernmental agreements (IGAs) to implement FATCA.
For a U.S. taxpayer is makes no difference which model of IGA is used by the jurisdiction where he/she has the foreign assets to be reported.
An IGA can have one of two statuses: in effect and agreed in substance.
The absence of a IGA between a jurisdiction and the U.S. doesn't mean that the jurisdiction's FFIs don't participate in FATCA. FFIs of the jurisdiction are subject to standard FATCA provisions: they must register with the IRS and agree to meet FATCA requirements in an FFI agreement, including due diligence, reporting and withholding.
Most of European countries and their dependent territories have agreed to participate in FATCA by signing IGAs. However, there are several countries which have not signed IGAs and several countries which agreed in substance on signing an IGA.
The following European countries don't have an IGA signed or agreed in substance:
The following countries have IGAs in "agreed in substance" status:
The rest of European counties and their dependent territories have signed the IGAs.
Several European countries and territories have signed Model 2 IGAs: financial institutions of these countries will report will report directly to the IRS:
These agreements are non-reciprocal, and start date of the reporting is not specified in the agreements.
The rest of the European countries have signed Model 1 IGAs: their financial institutions will report the information to their local authorities, which in turn will report it to the IRS. Under these agreements, the financial institutions are required to identify U.S. taxpayers by January 1, 2017 and to report the information for 2017 and the subsequent years.
Non-reciprocal agreements are signed with
The rest of the agreements are reciprocal.
|Algeria||agreed||30 June 2014||Model 1|
|Angola||agreed||30 November 2014||Model 1|
|Anguilla||agreed||30 June 2014||Model 1|
|Antigua and Barbuda||agreed||03 June 2014||Model 1|
|Armenia||agreed||08 May 2014||Model 2|
|Australia||in effect||28 April 2014||Model 1|
|Austria||in effect||29 April 2014||Model 2|
|Azerbaijan||agreed||16 May 2014||Model 1|
|Bahamas||in effect||03 November 2014||Model 1|
|Bahrain||agreed||30 June 2014||Model 1|
|Barbados||in effect||17 November 2014||Model 1|
|Belarus||in effect||18 March 2015||Model 1|
|Belgium||in effect||23 April 2014||Model 1|
|Bermuda||in effect||19 December 2013||Model 2|
|Brazil||in effect||23 September 2014||Model 1|
|British Virgin Islands||in effect||30 June 2014||Model 1|
|Bulgaria||in effect||05 December 2014||Model 1|
|Cape Verde||agreed||30 June 2014||Model 1|
|Cambodia||agreed||30 November 2014||Model 1|
|Canada||in effect||05 February 2014||Model 1|
|Cayman Islands||in effect||29 November 2013||Model 1|
|Chile||in effect||05 March 2014||Model 2|
|China||agreed||26 June 2014||Model 1|
|Colombia||in effect||20 May 2015||Model 1|
|Costa Rica||in effect||26 November 2013||Model 1|
|Croatia||in effect||20 March 2015||Model 1|
|Curacao||in effect||16 December 2014||Model 1|
|Cyprus||in effect||02 December 2014||Model 1|
|Czech Republic||in effect||04 August 2014||Model 1|
|Denmark||in effect||19 November 2012||Model 1|
|Dominica||agreed||19 June 2014||Model 1|
|Dominican Republic||agreed||30 June 2014||Model 1|
|Estonia||in effect||11 April 2014||Model 1|
|Finland||in effect||05 March 2014||Model 1|
|France||in effect||14 November 2013||Model 1|
|Georgia||in effect||10 July 2015||Model 1|
|Germany||in effect||31 May 2013||Model 1|
|Gibraltar||in effect||08 May 2014||Model 1|
|Greece||agreed||30 November 2014||Model 1|
|Greenland||agreed||29 June 2014||Model 1|
|Grenada||agreed||16 June 2014||Model 1|
|Guernsey||in effect||13 December 2013||Model 1|
|Guyana||agreed||24 June 2014||Model 1|
|Haiti||agreed||30 June 2014||Model 1|
|Holy See (Vatican City State)||in effect||10 June 2015||Model 1|
|Honduras||in effect||31 March 2014||Model 1|
|Hong Kong||in effect||13 November 2014||Model 2|
|Hungary||in effect||04 February 2014||Model 1|
|Iceland||in effect||26 May 2015||Model 1|
|India||in effect||09 July 2015||Model 1|
|Indonesia||agreed||04 May 2014||Model 1|
|Iraq||agreed||30 June 2014||Model 2|
|Ireland||in effect||23 January 2013||Model 1|
|Isle of Man||in effect||13 December 2013||Model 1|
|Israel||in effect||30 June 2014||Model 1|
|Italy||in effect||10 January 2014||Model 1|
|Jamaica||in effect||01 May 2014||Model 1|
|Japan||in effect||11 June 2013||Model 2|
|Jersey||in effect||13 December 2013||Model 1|
|Kazakhstan||agreed||30 November 2014||Model 1|
|Kuwait||in effect||29 April 2015||Model 1|
|Latvia||in effect||27 June 2014||Model 1|
|Liechtenstein||in effect||19 May 2014||Model 1|
|Lithuania||in effect||26 August 2014||Model 1|
|Luxembourg||in effect||28 March 2014||Model 1|
|Macau||agreed||30 November 2014||Model 2|
|Malaysia||agreed||30 June 2014||Model 1|
|Malta||in effect||16 December 2013||Model 1|
|Mauritius||in effect||27 December 2013||Model 1|
|Mexico||in effect||09 April 2014||Model 1|
|Moldova, Republic of||in effect||26 November 2014||Model 2|
|Montenegro||agreed||30 June 2014||Model 1|
|Montserrat||agreed||30 November 2014||Model 1|
|Netherlands||in effect||18 December 2013||Model 1|
|New Zealand||in effect||12 June 2014||Model 1|
|Nicaragua||agreed||30 June 2014||Model 2|
|Norway||in effect||15 April 2013||Model 1|
|Panama||agreed||01 May 2014||Model 1|
|Paraguay||agreed||06 June 2014||Model 2|
|Peru||agreed||01 May 2014||Model 1|
|Philippines||in effect||13 July 2015||Model 1|
|Poland||in effect||07 October 2014||Model 1|
|Portugal||in effect||06 August 2015||Model 1|
|Qatar||in effect||07 January 2015||Model 1|
|Romania||in effect||28 May 2015||Model 1|
|San Marino||agreed||30 June 2014||Model 2|
|Saudi Arabia||agreed||24 June 2014||Model 1|
|Serbia||agreed||30 June 2014||Model 1|
|Seychelles||agreed||28 May 2014||Model 1|
|Singapore||in effect||09 December 2014||Model 1|
|Slovakia||in effect||31 July 2015||Model 1|
|Slovenia||in effect||02 June 2014||Model 1|
|South Africa||in effect||09 June 2014||Model 1|
|Korea, Republic of||in effect||10 June 2015||Model 1|
|Spain||in effect||14 May 2013||Model 1|
|Saint Kitts and Nevis||agreed||04 June 2014||Model 1|
|Saint Lucia||agreed||12 June 2014||Model 1|
|Saint Vincent and The Grenadines||agreed||02 June 2014||Model 1|
|Sweden||in effect||08 August 2014||Model 1|
|Switzerland||in effect||14 February 2013||Model 2|
|Taiwan||agreed||23 June 2014||Model 2|
|Thailand||agreed||24 June 2014||Model 1|
|Trinidad and Tobago||agreed||30 November 2014||Model 1|
|Tunisia||agreed||30 November 2014||Model 1|
|Turkey||in effect||29 July 2015||Model 1|
|Turkmenistan||agreed||03 June 2014||Model 1|
|Turks and Caicos Islands||in effect||01 December 2014||Model 1|
|Ukraine||agreed||26 June 2014||Model 1|
|United Arab Emirates||in effect||17 June 2015||Model 1|
|United Kingdom||in effect||12 September 2012||Model 1|
|Uzbekistan||in effect||03 April 2015||Model 1|