This blog was last updated on June 27, 2021
FATCA’s global implementation keeps moving along, with its ups and downs along the way. Recently, the IRS announced they have had successful exchanges of information while concurrently announcing a year extension to the September 30, 2015 reporting due date, much to the relief of financial organizations with significant global operations. We have also seen the IRS enter into its first Competent Authority Arrangements (CAAs) with 8 countries already, a number that is likely to grow throughout the next year. There could be a connection in the timing of the exchanges and the CAAs, but it’s hard to say for sure. What we can say with certainty is that the coming year is much needed, not only to fill in the blanks on where and how the exchanges are to happen, but also to complete the process of executing FATCA on a world-wide scale. US Extends Some FATCA Deadline to Exchange Information September 30, 2015 was supposed to be a monumental day, of sorts, for the grand implementation of FATCA because it was the first time that partner jurisdictions were required to exchange information about reportable accounts that they had obtained. However, the IRS recognized that many of these partner jurisdictions were still behind in the process of getting various FATCA requirements in place and were not going to be able meet the September 30 deadline. This left open the possibility of a Foreign Financial Institution (FFI) in those jurisdictions being subject to the 30% withholding even though they had done their part. In response, the IRS issued Notice 2015-66, providing relief for FFIs in partner jurisdictions who’s IGA had not yet taken effect by granting them a one year extension so long as the partner jurisdiction not only demonstrates a firm resolve to bring the IGA into force, but also to exchange this year’s information, next year. For those FFIs in countries where the IGA is in effect, those FFIs will also be treated compliant so long as the partner jurisdiction makes a similar assurance. However, for them, there is no full calendar year extension. It is worth remembering that the extension has no effect on an FFI’s deadline to report information to their own jurisdiction. Several partner jurisdictions have already announced a delay of FATCA reporting for 2014. US Begins Sending FATCA Information On October 2, 2015, the IRS announced that they had exchanged financial information with, in their own words, “certain foreign tax administrations.” These reciprocal exchanges are only for Model 1A countries. While the announcement is a welcome sign that the FATCA implementation is moving forward, one question that presents itself is just with whom is the IRS sharing information? In its same announcement, the IRS states that it will only engage in information exchanges with those foreign jurisdictions that have met the “IRS’s stringent safeguard, privacy, and technical standards.” Presumably, those countries are the 34 countries that the IRS has deemed “appropriate” to exchange information, (see IRS Rev. Proc. 2015-50). However, currently only 8 of those countries have a Competent Authority Arrangement, which may or may not be necessary based on that country’s IGA, and that 6 of those were posted on the IRS’s website after the announcement on October 2. But perhaps that’s not a big deal since Australia announced that they had exchanged information on September 23, a day before it was announced that Australia had signed a CAA with the U.S. Either way, what is clear is that the IRS has begun sending and receiving information with certain jurisdictions right around the original September 30 deadline. This is quite a milestone, even if there is more work needed with the remaining partner countries. Over the coming year, in order to get ready for the second September 30 deadline, the IRS will likely take what has worked recently and apply that across the board to get other remaining jurisdictions up to speed. IRS Reaches Competent Authority Arrangement with 8 Countries On September 24, 2015, the US entered into its first Competent Authority Arrangements (CAAs) with Australia and the United Kingdom. Similar agreements were subsequently put in place with the Czech Republic, India, Hungary, Liechtenstein, the Republic of Mauritius, and New Zealand. These agreements give effect to the mutual promise laid forth in the Model IGA to establish an agreed upon framework for each nation’s competent authority to exchange information with the other. In particular, these Arrangements articulate the necessary rules and procedures for each country to fully administer the automatic exchange obligations of reportable information. At first glance, the impact of these Arrangements might seem de minimis to businesses gearing up to FATCA. For instance, for many, it is likely not significant to know the exact requirements that the Republic of Mauritius needs to take should they decide to report in a non-Latin domestic alphabet. However, what these Arrangements do signify is that the US and its partner jurisdictions are slowly making progress to fully fulfill FATCA’s obligations. While it may not be worth it to go over the minutiae of every detail, since it is unlikely to affect internal operations in any major way, the mere fact that the CAAs are being put in place spotlights the fact that some countries are closer to exchanging information with the US than others.
