Treasury Revises Model IGAs' Annex I Affecting Due Diligence Procedures

The U.S. Treasury Department ("Treasury") revised the Annex I to the Model 1 and Model 2 Intergovernmental Agreements ("IGAs") under FATCA. Annex I contains reasonably simplified due diligence procedures that Foreign Financial institutions ("FFIs") in IGA countries must follow to determine the direct and indirect U.S. owners. Generally, the due diligence procedures in Annex I differ depending on whether the account was opened prior to July 1, 2014 (a "preexisting account") or on or after that date (a "new account") and whether the account holder is an individual or an entity. In Notice 2014-33, Treasury announced that new accounts opened by entities between July 1, 2014 and December 31, 2014 would be treated as "preexisting accounts" and not "new accounts." This gives FFIs until June 30, 2016 to complete due diligence and obtain "self-certification" for these "new" accounts. The changes in Annex I extend this right to FFIs in IGA countries that have chosen to adopt such procedures.

Annex I also has been revised to add a special due diligence procedure for IGA countries that have not yet revised their laws to require FFIs in their countries to comply with the Annex I due diligence obligations. Under this alternative procedure, FFIs would have until the first anniversary of the date of entry into force of the IGA to complete due diligence and obtain required self-certifications from account holders on new accounts opened by individuals and entities prior to the earlier of (i) the date on which the local government has the ability to compel FFIs to comply with the normal due diligence procedures in Annex I or (ii) the date of entry into force of the IGA. If the FFI has not received the required self-certification by the first anniversary of the date of entry into force of the IGA, it must close the account and conduct due diligence under procedures applicable to preexisting accounts and, to the extent the account is determined under those procedures to be owned directly or indirectly by a U.S. person or by a Nonparticipating FFI, to report information on such account to the local government for transmittal to the United States.

The changes reflected in the revised Annex I should be extended to previously signed IGAs under the "most favored nation" clause in the IGAs.

Treasury also has posted revised versions of the base Model 1 and 2 IGAs on its website.

See: Updated Annex I to Model 1 Agreement; Updated Annex II to Model 2 Agreement; Updated Model 2 Agreement, No TIEA or DTC; Updated Model 2 Agreement, Preexisting TIEA or DTC; Updated Nonreciprocal Model 1B Agreement, No TIEA or DTC; Updated Nonreciprocal Model 1B Agreement, Preexisting TIEA or DTC; Updated Reciprocal Model 1A Agreement, Preexisting TIEA or DTC.See also: Cabinet FATCA Materials (for Cabinet subscribers only). For more information, please contact Daniel Mulcahy or Mark Howe.