Treasury Releases Updated Drafts of FATCA IGA Models

The U.S. Treasury Department has posted on its website updated drafts of both Model 1 and Model 2 Intergovernmental Agreements ("IGAs") under FATCA. There are three separate versions of Model 1: Model 1A (Reciprocal), Model 1B (Non-Reciprocal), for countries with pre-existing tax treaties or Tax Information Exchange Agreements ("TIEAs") with the United States, and a new Model 1B (Non-Reciprocal), for Countries without a current tax treaty or TIEA with the United States. Likewise, Model 2 comes in two versions, one for countries with an existing tax treaty or TIEA with the United States, and one for countries without such an agreement. (All Model 2s are Non-Reciprocal.)

Treasury has also posted revised drafts of Annex I and Annex II for each Model. The draft Annex II reflects a change in Treasury strategy in negotiating IGAs. Originally, Annex II was to be customized for each country. The signed IGA with the United Kingdom is an example of that strategy. Now Treasury has developed a standard Annex II which reflects a summary of the FATCA regulations with certain modifications to which the United States is willing to agree. However, Treasury is willing to consider further specific modifications to Annex II to reflect particular local entities that do not fit within the regulatory exceptions, so long as Treasury concludes that such modifications do not increase the risk of tax avoidance.