Who’s in your Top Ten? – LP demands push decile rankings
Deciles and quartiles have been around for a long time and have been used to rank everything from hereditary traits …
On November 14, 2013, France signed an intergovernmental agreement (“IGA”) regarding FATCA with the United States, becoming the 10th country to join the global FATCA network taking effect on July 1, 2014. The Cayman Islands, Costa Rica, Malta, the British Crown Dependencies (Jersey, Guernsey, and Isle of Man), and the Netherlands followed suit shortly thereafter, bringing the total number of IGA countries to 17, and joining the ranks of the U.K., Denmark, Germany, Ireland, Japan, Mexico, Norway, Spain and Switzerland.
The Foreign Account Tax Compliance Act of 2010 (“FATCA”) requires foreign financial institutions (“FFIs”) to disclose offshore accounts belonging to U.S. taxpayers to the U.S. Internal Revenue Service (“IRS”) as a means of combatting U.S. tax evasion. Failure by an FFI to participate in the FATCA system will result in a penalty tax of 30% being withheld from certain U.S. source income.
The IGA comes in two versions, Model 1 and Model 2, with the former containing a reciprocity option. A Model 1 IGA FFI follows its IGA and local law, and does not sign an agreement with the IRS, although it generally will register with the IRS. By contrast, a Model 2 IGA FFI generally will follow the FATCA final regulations, and sign an agreement with the IRS. The Annex 1 to each IGA sets out the specific due diligence required of FFIs, while the Annex 2 details the accounts and entities entitled to reduced requirements or exemption under FATCA. Compliant FFIs resident in IGA countries will not be subject to the FATCA tax.
The recent IGA signatories all executed a Model 1 IGA. Consequently, their FFIs, including funds and their managers, will report information about U.S. customers’ accounts to their home governments, which, in turn, will exchange that information with the IRS. All but Cayman Islands signed the reciprocal version, which means the IRS will send those governments similar information about their national’s accounts in U.S. financial institutions.
In addition to the 17 signed IGAs, the U.S. reportedly has reached agreement on other IGAs and is negotiating with more than 50 countries. The addition of France and the Netherlands, in particular, to the roster of FATCA partner countries was widely viewed as critical for the continued global momentum behind FATCA.
Notice: The information contained in this publication should not be construed as legal advice. You are encouraged to consult your own tax advisors regarding the matters discussed herein.