July 26, 2012: Treasury Issues First Model Intergovernmental Agreements
In an effort to boost cooperation in countering offshore tax evasion and improve global tax compliance, the United States in conjunction with France, Germany, Italy, Spain and the United Kingdom has released a "Model Intergovernmental Agreement to Improve Tax Compliance and Implement FATCA". As a product of collaboration among the countries, the agreement establishes a framework for the automatic exchange of information between the "FATCA Partner" country and the United States using existing bilateral income tax treaties or tax information exchange agreements. As expected, the agreements will avoid the legal and privacy issues that would have prevented FATCA compliance from entities within the FATCA Partner countries. Additionally, models from the Japanese and Swiss discussions are forthcoming and as usual we will announce as soon as they are released.
At a high level, both the reciprocal and non-reciprocal versions of the agreement should help financial institutions reach important FATCA objectives, while potentially reducing costs to comply. We expect further negotiations on the specifics of what will be required in the country attachments. Much remains to be done to meet the requirements in the tight timeline, but this announcement represents a significant step forward in the global exchange of information to combat tax evasion.