Swiss Collective Investment Act


Taxation of U.S. Assets Held Abroad



The Foreign Account Tax Compliance Act (the “FATCA”) was enacted on 18 March 2010 as a part of the Hiring Incentives to Restore Employment Act (the “HIRE”) to improve compliance by U.S. taxpayers who maintain foreign financial assets and offshore accounts with U.S. tax laws. FATCA is mainly a response to the Swiss UBS banking scandal in 2009, after which it was revealed that many U.S. persons were maintaining a large amount of financial assets in secret Swiss bank accounts to avoid paying taxes in the U.S., resulting in UBS paying a U.S. Dollars Seven Hundred and Eighty Million (USD 780,000,000) fine. After pushing back FATCA deadlines several times, the U.S. Department of Treasury and the Internal Revenue Service (the “IRS”) issued the final FATCA regulations on 17 January 2013, with amendments and regulations necessary to effectuate FATCA published on 20 February 2014. These regulations will come into effect in multiple stages over the next few years, with withholding beginning on 1 July 2014.

FATCA requires U.S. persons – individuals, corporations, and entities – to disclose financial accounts and assets held offshore. FATCA also requires foreign financial institutions (the “FFIs”) to report to the IRS information regarding financial accounts held by U.S. taxpayers or held by foreign entities in which U.S. taxpayers hold a substantial ownership interest (generally, more than ten percent ownership). FFIs must agree to verification and due diligence procedures to identify and report to the IRS information regarding U.S. account holders/owners.  A FFI that does not comply with the reporting requirements faces a thirty percent (30%) withholding on tax on certain U.S. source payments (known as withholdable payments) regardless of whether the recipient or beneficial owner is a U.S. taxpayer. FATCA also applies to certain non-financial foreign entities (the “NFFEs”), although less burdensome requirements are implemented.

Furthermore, several foreign nations have entered into agreements with the IRS, known as Intergovernmental Agreements (the “IGAs”), whereby authorities exchange financial information of account holders within those countries in an effort to restrict tax evasion. These IGAs set out the information gathering and reporting requirements of FFIs within the partner jurisdiction, which must be followed to be deemed FATCA compliant.

This article will outline the various types of payments/income that fall under the purview of FATCA; the different reporting responsibilities and liabilities of individuals, FFIs and NFFEs; IGAs between the U.S. and other foreign countries; criticisms of the adoption and implementation of FATCA; and a timeline for registration and reporting under FATCA.


The IRS can levy a withholding tax on withholdable payments on a FFI that does not comply with FATCA regulations. A withholdable payment is a payment of either U.S. source income (defined as income that arises from sources within the U.S.) that is fixed or determinable, annual or periodical (the “FDAP”) income, or gross proceeds from the sale or disposition of property that can produce U.S. source interest or dividend income. Withholdable payments include, but are not limited to: any payment of interest; dividends; rents; royalties; salaries; wages; premiums; and annuities. Withholdable payments also include any interest paid by foreign branches of U.S. banks. However, income that is effectively connected with a U.S. business is generally exempt from the withholding requirement under FATCA. Moreover, withholdable payments will most likely not include foreign exchange payments, even though gains on such contracts are generally considered gross proceeds. Likewise, the transfer of money from somebody within the U.S. to someone in a foreign country shall not trigger FATCA withholding. However, money transferred into, and income earned in, a U.S. account may trigger FATCA reporting requirements.




Withholding may also be applicable to non-U.S. source payments called “passthru payments,” defined as “any withholdable payment or any other payment to the extent that it is attributable to a withholdable payment,” and includes a withholdable payment to a recalcitrant account holder or a non-compliant FFI. A recalcitrant account holder is an account holder that fails to provide a name, address or taxpayer identification number of an account holder; fails to comply with requests for information under IRS verification/due diligence procedures to identify U.S. accounts; or fails to provide a bank secrecy waiver upon request.

A passthru payment includes any portion of a payment that is not a withholdable payment multiplied by the institution’s “passthru payment percentage,” examples of which are provided in Notice 2011-34 published by the IRS. A FFI’s passthru payment percentage is calculated quarterly, by dividing the sum of the FFI’s U.S. assets held on each of the last four quarterly testing dates by the sum of the FFI’s total assets held on those dates.

The purpose of withholding on passthru payments is to allow a participating FFI to remain in compliance with its FFI Agreement (defined below under Reporting Duties of FFIs), even if some of its account holders fail to provide the necessary information to the FFI to determine whether the accounts are U.S. accounts subject to FATCA reporting, or if the account holder is a non-compliant FFI. The passthru payment rule also encourages FFIs that do not directly invest in the U.S. or that do not hold U.S. assets producing withholdable payments, but that benefit from investments that do produce payments attributable to withholdable payments, to enter into an agreement with the IRS.



The FATCA withholding regime is different than the current withholding system under the Internal Revenue Tax Code, and applies to different types of income. Chapters 3 and 61 of the Code cover the current withholding and reporting systems, and allow for certain reductions or exemptions from withholding tax under domestic law or tax treaties. FATCA, on the other hand, applies regardless of any reductions or exemptions, whether statutory or based on a treaty. Thus, if a FFI does not comply fully with FATCA regulations, the IRS may impose a thirty percent (30%) withholding tax on any payment that is not exempt and that is considered a withholdable payment.

Ultimately, FATCA withholding is not triggered depending on whether one has a business within or outside the U.S., but rather, depends on whether withholdable payments as defined under FATCA are received.


FATCA poses different reporting duties and responsibilities for entities depending on their classification: individual citizens, corporate entities deemed FFIs; or entities classified as NFFEs.




Individuals under FATCA consist of U.S. citizens, anyone born in the U.S., individuals of which either parent is a U.S. citizen, and U.S. residents or green card holders. There is also a catch-all provision which includes any person meeting the ‘substantial U.S. physical presence test,’ or if there is “U.S. indicia,” whereby such an individual would also be subject to FATCA reporting.

Individuals filing income taxes for the year with the IRS must file Form 8939 under FATCA to report certain foreign financial assets. This additional filing is required if the total value of the foreign assets is in excess of U.S. Dollar Fifty Thousand (USD 50,000) at the end of the tax year. If the total value of assets is at or below U.S. Dollar Fifty Thousand (USD 50,000), then reporting is not necessary unless the value was greater than U.S. Dollar Seventy-five Thousand (USD 75,000) at any time during the tax year. Reportable foreign assets include, but are not limited to: financial accounts held at FFIs; foreign stock or securities not held in a financial account; foreign partnership interests; foreign mutual funds; foreign accounts and foreign non-account investment assets in a trust for which the individual is the grantor; foreign-issued life insurance or annuity contracts; foreign hedge funds and foreign private equity funds.

The reporting threshold is greater for individuals living outside the U.S., and differ between married and single taxpayers, similar to the domestic tax reporting and filing system. An individual residing outside the U.S. must report assets valued at U.S. Dollar Two Hundred Thousand (USD 200,000) on the last day of the tax year, or U.S. Dollar Three Hundred Thousand (USD 300,000) at any time during the tax year.

It must be noted that if an individual does not need to file an income tax return for the year, then there is no requirement to file Form 8938 regardless of the total value of foreign assets in his/her possession.

Additionally, third parties may provide the IRS information, such as the identity of the account holder and financial information associated with the account (account number and account balance/value), of financial accounts maintained offshore on the behalf of U.S. individual account holders.

There are currently no regulations in place requiring domestic entities or institutions to file Form 8938 under FATCA; however, it is anticipated that regulations will be introduced within the upcoming years requiring such entities to file if they are formed or used to hold foreign financial assets exceeding the abovementioned thresholds.

Individual taxpayers required to file Form 8938 under FACTA will most likely be required to report substantially the same information to the U.S. Department of Treasury on the FBAR Form. An FBAR is required if any U.S. person, including corporations and other entities, have U.S. Dollar Ten Thousand (USD 10,000) or more held in certain types of foreign accounts at any time during the year.



FATCA requires FFIs to enter into an agreement with the IRS (the “FFI Agreement”), whereby the FFI must report directly to the IRS certain information regarding financial accounts and/or investments held by U.S. persons or foreign entities in which a U.S. person holds a substantial ownership interest, generally valued at more than a ten percent (10%) interest in the entity. A FFI under FATCA is defined as any non-U.S. entity that accepts deposits in the ordinary course of banking or similar business; holds financial assets for others; or that is engaged primarily in the business of investing, reinvesting or trading of securities, partnership interests, or commodities. Thus, FFIs include: banks, broker dealers, hedge funds, private equity funds, trustee companies, securitization vehicles and personal holding companies. Exempt from the definition of FFI under FATCA are: most governmental entities; non-profit organizations; certain small, local financial institutions; and, certain retirement entities.

FFIs must register with the IRS, obtain a Global Intermediary Identification Number (the “GIIN”), and report certain information on U.S. accounts to the IRS. As such, FFIs are obligated to engage in strict due diligence procedures and account verification processes as prescribed under FATCA regulations. Once the FFI and IRS have entered into such an agreement, if the FFI has a client who is non-compliant with FATCA regulations, the FFI is required to apply a thirty percent (30%) withholding tax on certain U.S. source payments to that client. Alternatively, if a FFI has not been exempted from FATCA regulations, and does not both register and agree to report to the IRS, a withholding tax of thirty percent (30%) will be placed on the FFI itself for certain U.S. source payments. If a FFI imposes a withholding tax on a non-compliant client, the withheld amount is generally credited against the U.S. income tax liability of the beneficial owner of the payment, or is refunded to the extent that the withheld amount is an overpayment of tax. Under a FFI Agreement, the FFI must also attempt to obtain a waiver of applicable bank secrecy or other information limitations from U.S. account holders, and if the waiver is not obtained within a reasonable amount of time, the FFI must close the U.S. account.

Regulations applicable to FFIs have undergone several stages spanning the past few years. On 12 July 2013, the IRS and Treasury Department announced that withholding agents would be required to begin withholding on withholdable payments made after 30 June 2014, and that the requirements of FFIs would begin after 30 June 2014. On 13 January 2014, the final FFI agreement was published, which an FFI may enter into with the IRS in order to be treated as a participating FFI under FATCA, thus making the FFI generally exempt from FATCA withholding under Chapter 4 of the Act. Chapter 4 states the final regulations including comprehensive due diligence, withholding, and reporting requirements for withholding agents and FFIs that were to begin on 1 January 2014.



U.S. Financial Institutions are currently required under U.S. tax law to report and withhold thirty percent (30%) on certain U.S. source payments made to foreign entities if unable to document such entities under FATCA regulations. Currently, a U.S. withholding agent does not have a responsibility to identify and report owners of a non-U.S. entity; however, FATCA introduces an obligation to report foreign entities with substantial U.S. direct and indirect owners.



Non-financial Foreign Entities are those foreign entities who are not qualified as FFIs under FATCA. Such entities include corporations with stock traded on established securities markets; foreign governments; international organizations; and foreign central banks. Generally, NFFEs do not have FATCA reporting or withholding duties toward the IRS. However, FATCA does impose a thirty percent (30%) withholding on withholdable payments on NFFEs that fail to either disclose substantial U.S. owners, or to certify that no substantial U.S. owners exist. Further, a NFFE which is a client of, or an investor in a participating FFI, may be asked to provide FATCA certification on the U.S. or non-U.S. tax status of their direct or indirect owners. If this information is not provided in a timely manner, the account will be deemed non-compliant with FATCA and may be subject to withholding. NFFEs that do not qualify for excepted status under FATCA are classified as passive NFFEs under the regulations, and are required to disclose its substantial U.S. owners to a withholding agent who will in turn file this information via Form 8966 with the IRS.



In cases where foreign law would prevent or prohibit a FFI from reporting information directly to the IRS, the Department of Treasury, in collaboration with foreign governments, has developed IGAs in order to facilitate the implementation of FATCA reporting. These IGAs remove any obstacles to FFI compliance with FATCA by allowing them to fulfill their information reporting responsibilities. The IGAs also reduce and simplify burdens placed on FFIs in the participating jurisdictions, and these FFIs will not be subject to FATCA withholding.

There are two classes of IGAs: Model 1 and Model 2. Thus far, twenty-two (22) countries have signed on to Model 1 agreements, and four (4) countries have signed Model 2 agreements. The U.S. also released on 2 April 2014 additional jurisdictions that will be treated as having “IGAs in effect,” bringing the total number of such jurisdictions to forty-six (46). Under Model 1 agreements, the partner jurisdiction generally agrees to adopt rules that would require FFIs located within that jurisdiction to identify and report U.S. accounts and information that fall under FATCA’s purview to the jurisdiction itself, and the jurisdiction would then subsequently report the necessary information to the IRS. Some Model 1 IGAs are reciprocal, which means that the U.S. would also have to provide certain information about residents of the Model 1 country to that country in exchange for information about U.S. accounts provided to the IRS. An FFI in the jurisdiction of a Model 1 agreement would not be required to sign an FFI Agreement with the IRS, but does need to register under FATCA with the IRS. Countries with Model 2 agreements agree to instruct all relevant FFIs located within the jurisdiction to follow the particular terms of an FFI Agreement by reporting the required information regarding U.S. accounts directly to the IRS. Therefore, the main differences between Model 1 and Model 2 IGAs are that Model 2 FFIs report information directly to the IRS rather than their local tax authorities, and that there is no reciprocity with regard to exchanging information under the Model 2 IGAs.



Switzerland signed a Model 2 IGA with the U.S. on 14 February 2013. Due to legal and contractual restrictions in Switzerland, financial institutions would not have been able to fully comply with the reporting, disclosure and withholding requirements under FATCA. As such, the IGA addresses these impediments to compliance with FATCA, simplifies its implementation, and reduces costs to FFIs.

Under the U.S.-Switzerland IGA, Switzerland agrees to several responsibilities: direct all Swiss financial institutions that are not otherwise exempt or that are deemed compliant under the Agreement to execute a FFI Agreement with the IRS; adopt regulations that would enable Swiss FFIs to comply with FATCA provisions and FFI Agreements; and comply with any group requests from the U.S. for additional information regarding recalcitrant U.S. accounts. Using a group request, the IRS can demand complete information of the recalcitrant account holders that the FFI would have reported under FATCA rules had it received consent to report from the account holder. Without the implementation of this IGA, Swiss FFIs were in a difficult legal predicament; Article 271 of the Swiss Criminal Code states that “[a]ny person who carries out activities on behalf of a foreign state without lawful authority” commits a crime, which would have put any Swiss FFI complying with FATCA in violation of Swiss law since the FFI would be carrying out IRS/U.S. policy by providing the IRS with the required information. Therefore, with the IGA, Swiss FFIs have been granted immunity from prosecution for reporting bank/account information to the IRS. Furthermore, Swiss banking secrecy laws prevent the disclosure of account information by Swiss financial institutions to tax authorities; however, the FATCA IGA now allows the financial institutions to report the required information to the IRS.

In return, the U.S. agrees to identify specific categories of Swiss FFIs that would be deemed compliant or exempt; to eliminate U.S. withholding under FATCA on payments to Swiss FFIs by classifying all Swiss FFIs as either participating or deemed compliant; and agrees to certain other measures in order to reduce any burdens and to simplify FATCA’s implementation in Switzerland.

Additionally, Swiss FFIs would not be required to either terminate the account of a recalcitrant account holder or to “impose foreign passthru payment withholding on payments to recalcitrant account holders, or to other financial institutions in Switzerland, or in another jurisdiction with which the United States has in effect either an agreement for an intergovernmental approach to FATCA implementation, or an agreement for intergovernmental cooperation to facilitate FATCA implementation.” Previously, in accordance with current Swiss banking secrecy rules, the financial institution was required to obtain prior consent from the U.S. account holder before reporting financial information to the IRS. If the account holder did not consent, the financial institution could not report information, but could report “nameless aggregates” and the number of accounts that would be considered recalcitrant accountholders. However, on 6 March 2014, parliament voted to provide foreign tax authorities with identifying information regarding account holders with undeclared accounts in Swiss banks without having to give the account holder notice in advance. However, there is a requirement that the country requesting the information must show that providing notice to the account holder would hinder the investigation.

It is important to note that since the agreement between the U.S. and Switzerland is a Model 2 IGA, no reciprocity is required under the Agreement, and as a result, the U.S. is under no obligation to provide similar information to Switzerland regarding its account holders in the U.S..


On 16 December 2013, Malta and the U.S. announced that they had entered into an IGA to implement FATCA. This agreement is a Model 1 IGA in which there is reciprocity, whereby financial institutions in each country will report certain financial information to their own governments, who in turn will then automatically exchange that information with one another on an annual basis. “Malta Financial Institutions” refers to financial institutions resident in Malta (with the exclusion of any branch of such financial institutions located outside Malta), and

to any branches of non-resident financial institutions located in Malta.

Under this agreement, investment funds, banks and insurers in Malta will be able to register and report information directly to the Maltese tax authorities regarding U.S. shareholders or beneficial owners. Once a financial institution is registered, it may be exempt from the U.S. withholding tax on income received from U.S. investments and from withholding tax on payments made to the U.S. resident beneficial owners and/or shareholders. Annex II of the IGA also includes a list of certain exempt beneficial owners, products, and deemed compliant entities, which will have no reporting obligations under FATCA. Under the Agreement, the financial institution will only incur a withholding tax if the U.S. considers the institution to be a Nonparticipating FFI (the “NFFI”), which may occur when the financial institution has not resolved any issues of non-compliance within 18 months of first being put on notice by the U.S..

Malta Financial Institutions that fall under the IGA and FATCA rules will be required to disclose information regarding their U.S. Reportable Accounts to the Maltese Competent Authority, who will then forward the information to the U.S. Competent Authority on an annual basis within nine months after the end of the applicable calendar year. The Malta Investment Registration Scheme, to be launched shortly, will give citizens of Malta the opportunity to voluntary comply with tax regulations and FATCA provisions, and to disclose their previously undeclared investments before domestic tax authorities have the chance to act based on information received from abroad.



The Cayman Islands and the U.S. signed an agreement on 29 November 2013, entering into a non-reciprocal Model 1 IGA, which would require all Cayman reporting institutions to implement FATCA Compliance Programs before 1 July 2014. The governments also entered into a new tax information exchange agreement (the “TIEA”), replacing an already existing TIEA signed in 2001. The new TIEA specifies the mechanisms by which information will be exchanged automatically. Under the IGA, Cayman FFIs are required to provide information about their U.S. account holders to the Cayman Islands Tax Information Authority (the “CITIA”), which will then share that information with the IRS. CITIA is the sole channel in the Cayman Islands for providing tax information to other governments. Financial institutions that comply with the due diligence and reporting requirements set forth in the IGA will be eligible to be treated as a registered deemed compliant FFIs under FATCA.

Cayman funds should not be subject to withholding on U.S. source income if they register with the IRS, report the required information to CITIA, and report the name of each non-participating FFI to which they have made payments as well as the aggregate amount of such payments to CITIA. This final reporting requirement takes effect starting in 2015. Additionally, if CITIA notifies the IRS of recalcitrant account holders, then the Cayman funds will not be obligated to withhold on the account holder, or to close the account.



FATCA and its implementation process have been severely criticized since its adoption in 2010. Due to various implementation obstacles, and due to unclear rules and regulations, FATCA compliance deadlines have been pushed back numerous times, with the final date now set at 1 July 2014. Many critics take these delays to mean that FATCA is too burdensome and complicated as it stands currently to be properly followed and applied on a global scale. The main criticisms deal with the cost-effectiveness of the Act; the burden it imposes on foreign institutions and governments, as well as on the IRS; and the legality of the Act and IGAs with foreign governments.


FATCA has been criticized as a tool used by the U.S. government by which foreign banks and institutions have no choice but to spend millions of dollars in order to help the U.S. enforce its own tax law. According to the Institute of International Bankers, foreign banks are estimated to have to spend at least U.S. Dollar Two Hundred and Fifty Million (USD 250,000,000) each to comply with FATCA regulations in order to recoup approximately U.S. Dollar Eight Hundred Million (USD 800,000,000) per year over the next decade, as projected by the Congressional Budget Office. The U.S. Dollar Eight Hundred Million (USD 800,000,000) figure has been subject to criticism since this amount is vastly understated from the U.S. Dollar One Hundred Billion (USD 100,000,000,000) initially claimed to be lost overseas due to tax evasion each year. Thus, many critics are of the view that the U.S. Dollar Eight Hundred Million (USD 800,000,000) to be recovered is outweighed by the cost of implementing and complying with FATCA, borne by individual taxpayers and financial institutions, as well as the Department of Treasury. There is also great concern regarding the ability of the IRS to handle the huge influx of new data, as well as the additional costs that come with implementing such methods to process this information.



Another aspect of the burden imposed on financial institutions is with regard to obtaining and maintaining records of client information. The institutions will need to ensure that the information they have in relation to each client is current, complete, and electronically available, so as to comply with the reporting requirements under FATCA. Obtaining all the necessary information from clients, as well as keeping track of all client information, will be a difficult and intensive task. Additionally, financial institutions will also be required to prove the U.S./non-U.S. classification of its clients to the IRS, i.e. whether the institution has any U.S. clients, or whether there are any direct or indirect U.S. assets being held, in order to avoid the thirty percent (30%) withholding tax being applied on the institution. Trade groups, such as the European Banking Federation and the Institute of International Bankers, have stated that forcing banks to track passthru payments on loans, foreign currency trades, and routine money transfers will “create stresses in the global financial system with indeterminate consequences.” There are implications for individual taxpayers as well; the U.S. is the only nation that taxes citizens who live overseas, and imposes dual requirements for reporting foreign accounts and assets. Currently, U.S. citizens living abroad are already required to report their foreign accounts to the Department of Treasury via FBAR as discussed earlier. Under FATCA, they must now report these same details to the IRS as well, which creates an additional burden since the reporting process and requirements are not the same under both regimes.




Furthermore, the imposition of such burdens and liabilities on foreign institutions will make it more difficult for U.S. citizens and companies to operate abroad. For instance, FATCA will make it more difficult for U.S. individuals to obtain a mortgage or to purchase foreign insurance policies since financial institutions may refuse to take on a U.S. client due to FATCA implications. Foreign business and institutions will have to evaluate or determine how much they value U.S. investments or clients. Large financial entities and multi-national corporations will have no choice but to bear the cost and continue to comply with FATCA, however, certain smaller firms may only have the option of complete withdrawal from dealing with the U.S. There have been some reports that foreign banks have either turned away U.S. clients by refusing to open new accounts, or have even closed existing accounts, due to the burdens of complying with FATCA, although there is no concrete data on the extent of these banking disruptions. Banks are also hesitant to deal with American clients now, due to the repercussions/penalties suffered by UBS, fearing that such sanctions will be imposed on other financial institutions as well. Even with regard to various types of foreign funds, fund managers may be forced to take drastic measures to avoid liability under FATCA, either by barring U.S. clients from investing in the funds or requiring them to own separate classes of shares. Some global funds might even avoid American assets entirely. There is also concern that FATCA will result in deterring foreign investment in U.S. securities, which would also have negative consequences for the U.S. economy.



Other critics are also concerned with the legality of FATCA and IGAs entered into by the IRS and foreign governments. Some foreign countries that have entered into IGAs with the U.S. have domestic banking and data privacy laws restricting or altogether prohibiting the disclosure and transfer of personal/financial information to foreign entities. For example, as mentioned earlier, Switzerland has certain banking secrecy laws which imposed restrictions on how and when financial information could be shared with foreign governments. FATCA has required that these restrictions be waived by foreign institutions when necessary to afford full compliance, or otherwise a withholding tax would be levied for failure to comply. Moreover, some are of the view that IGAs were invented as a tool to bypass these domestic laws prohibiting exchange of information with foreign governments, since under the IGAs, the information is passed to the countries’ own governments/authorities, who then transfer the information over to the IRS. Not only are IGAs not expressly authorized in the statute creating FATCA, the IGAs also permit the IRS to share similar information with foreign governments under reciprocity, which has also raised legal concerns.



On 24 January 2014, the Republican National Committee (the “RNC”) approved a resolution that called for a repeal of FATCA. In the resolution, the RNC has claimed that FATCA forces U.S. citizens living abroad to make the “horribly unfair choice” of either abandoning business overseas or renouncing their U.S. citizenship. However, the Republican Party has faced criticism since passing the resolution, with claims that the resolution shows support for tax fraud and evasion. In response, the main sponsor of the resolution has asserted that it is untrue that the Republic party wishes to facilitate tax evasion, but that the concern mainly stems from FATCA being a “dragnet,” at the expense of “violating 7.6 overseas Americans’ right to privacy, right to earn a living, right to have banking services, and right to their private property.” Nevertheless, despite the RNC resolution, the general view is that it is unlikely that FATCA will be repealed in the near future. This is mostly based on the fact that IGAs are gaining popularity in the global arena, with several countries continually signing on to the quest to stop foreign tax evasion. Foreign banks have also already spent substantial sums of money amounting to millions of dollars in compliance costs. Thus, even with all the complications and criticisms surrounding FATCA, it is generally considered unlikely that FATCA will be repealed soon.



As mentioned, FATCA was signed into law in 2010, with draft FATCA regulations being signed in February 2012. After a series of delays, “final” FATCA regulations were released on 17 January 2013, although clarifications and other temporary regulations were released February 2014. FFI Agreements became effective on 31 December 2014. The last date for FFIs to register with the IRS to be placed on their registered list is currently set at 5 May 2014, and the final list will be published by the IRS on 2 June 2014. Most importantly, 1 July 2014 will be the start date for due diligence and identification procedures. This will also be the date that FATCA withholding begins on U.S. source payments to new account holders identified as non-participating FFIs, recalcitrant account holders, and passive NFFEs with undisclosed substantial U.S. owners. Participating FFIs are to begin withholding on preexisting accounts on 31 December 2014 for entity accounts and high-value accounts. Withholding begins by FFIs on other accounts on 31 December 2015. There are various reporting obligations that occur during 2015 and 2016, using several different Forms to be submitted to the IRS. 1 January 2017 marks the beginning of FATCA withholding on certain gross proceeds payments to noncompliant accounts, foreign passthru payments, and qualified collective investment vehicles.

In light of these deadlines, there has been a lot of pressure to push the deadline from 1 July 2014 to 1 January 2015 so that FFIs may ensure that they are fully compliant with the regulations. However, there has been “recent speculation from the U.S. government” that this deadline will not get pushed back and there will be no delay in FATCA implementation. Thus, FFIs are the ones asking for a delayed implementation start date as opposed to the IRS indicating a delay. FFIs are seeking a delay so as to implement information technology (the “IT”) and internal human resources procedures to better comply with FATCA requirements. The withholding payment scheme also remains unclear and requires further clarification, and will have to be addressed in the near future before withholding begins.




As a result of the UBS scandal, and with the implementation of FATCA, there has been a great increase in the desire for globalization and sharing of information between countries in recent years. Therefore, the current trend is towards sharing financial information across borders to curb tax evasion. This movement has been largely driven by the Organization for Economic Cooperation and Development (the “OECD”) countries, especially the G20 nations. These countries want to create a framework for several multilateral information exchange agreements and systems much like the FATCA regime. Although there are no details as yet regarding what these new agreements will look like, they will all have common rules in relation to the exchange of information and due diligence procedures, as well as common reporting standards. Thus, these agreements will most likely reflect FATCA IGAs. The timeline for the OECD framework is expected to be implemented in 2015, with more than forty (40) countries currently signed on.


The information contained herein is for informational purposes only and is not meant to serve and should not be relied upon as legal advice. Further information on the subject matter of this publication may be obtained from lecocqassociate.


According to the U.S. Department of Treasury, the following jurisdictions currently have an IGA in effect as of 3 April 2014:

Model 1 IGA

  1. Canada
  2. Cayman Islands
  3. Costa Rica
  4. Denmark
  5. Finland
  6. France
  7. Germany
  8. Guernsey
  9. Hungary
  10. Honduras
  11. Ireland
  12. Isle of Man
  13. Italy
  14. Jersey
  15. Luxembourg
  16. Malta
  17. Mauritius
  18. Mexico
  19. Netherlands
  20. Norway
  21. Spain
  22. United Kingdom


Model 2 IGA

  1. Bermuda
  2. Chile
  3. Japan
  4. Switzerland


The following jurisdictions have reached IGAs in substance, with a start date of 2 April 2014:

Model 1 IGA

  1. Australia
  2. Belgium
  3. Brazil
  4. British Virgin Islands
  5. Czech Republic
  6. Gibraltar
  7. Jamaica
  8. Kosovo
  9. Latvia
  10. Liechtenstein
  11. Lithuania
  12. New Zealand
  13. Poland
  14. Portugal
  15. Qatar
  16. Slovenia
  17. South Africa
  18. South Korea
  19. Romania


Model 2 IGA

  1. Austria


Our Experience


lecocqassociate provides a full range of financial regulatory, corporate and commercial advice in relation to the structuring and incorporation of entities.

This newsletter is for information purposes only. It does not constitute professional advice or an opinion. Please contact Mr. Dominique Lecocq on for any questions.

Subscribe to our publications: Privacy Policy

You have successfully subscribed to our newsletters

There was an error while trying to send your request. Please try again.

lecocqassociate will use the information you provide on this form to be in touch with you and to provide updates and marketing.