From 1 January 2017, jurisdictions that have not yet brought
their Intergovernmental Agreement (IGA) into force, will no longer
be seen to have an IGA in the eyes of the US Department of Treasury.
Notice no. 2013-43 released by the US Department of Treasury in
2012 permitted a jurisdiction that had signed but not brought into
force its IGA, to be treated as if it had an IGA in effect. This
was as long as the jurisdictions took the necessary steps to make
it so within a reasonable amount of time.
This 'grace period' will cease from 1 January
2017, as the US Department of Treasury updates the IGA
list. Each jurisdiction with an IGA not yet in force, that wishes
to continue to be treated as having an IGA in effect, must submit
an explanation and step-by-step plan.
Which jurisdictions are affected?
Of the 83 jurisdictions that have signed an IGA, 61 are
currently in force. 30 jurisdictions have reached agreements in substance. The US
Treasury is urging the remaining 53 countries to effectuate their
IGAs by 31 December 2016.
Consequences for FFIs located in countries that cease to be
treated as if an IGA is in effect
Foreign Financial Institutions (FFIs) located in countries that
cease to be treated as if an IGA is in effect will no longer be
able to rely on the IGA to be treated as complying with, and exempt
from, withholding under FATCA.
Unless they qualify for an exemption under the FATCA
regulations, the concerned FFIs will have to enter into FFI
agreements with the IRS in order to comply with their FATCA
obligations; including reporting information to the IRS and
withholding pursuant to the terms of the FFI Agreement.
A jurisdiction will be treated as having an IGA in effect for at
least 60 days after the jurisdiction's status on the IGA is
updated in the IRS website.
FFIs must check if they are located in one of the jurisdictions
that will cease to have an IGA in effect from next year. If this is
the case, they should consider entering into an agreement with the
IRS. Although the governments are responsible for the legislative
process, FFIs will be impacted if there is no IGA in force as per 1
January 2017, so the FFI should enter into an FFI agreement in a
timely manner in order to comply.
Talk to us
If TMF Group is providing services to per 1 January 2017, Our
in-country experts can assist where FFIs are located in one of the
jurisdictions that may cease to have an IGA in effect. Our
servicing teams can assist the FFIs to continue to be tax compliant
with regards to FATCA, and once an agreement is put in place with
the IRS, we can help to make sure the reporting is completed within
the legal deadlines.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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