InternationalTax Services - According to Iceland's Ministry of Finance, the U.S. and Iceland
signed an intergovernmental agreement (IGA) to implement the Foreign Account
Tax Compliance Act (FATCA) on Dec. 2, 2014.
Background. The Hiring Incentives to Restore Employment
Act of 2010 (P.L. 111-147) added Chapter 4 (Code Sec. 1471 through Code Sec.
1474, FATCA ) to the Code. Chapter 4 generally requires withholding agents to
withhold tax on certain payments to a foreign financial institutions (FFI)
unless it has entered into a FFI agreement with the U.S. to, among other
things, report certain information with respect to U.S. accounts. The withholding
rules are essentially a mechanism to enforce new reporting requirements.
Chapter 4 also imposes withholding, documentation, and reporting requirements
on withholding agents, with respect to certain payments made to certain
non-financial foreign entities (NFFEs).
In
cases in which foreign law would prevent an FFI from complying with the terms
of an FFI agreement, IRS has collaborated with other governments to develop two
alternative model intergovernmental agreements (IGAs) that facilitate FATCA
implementation. Reporting financial institutions under an applicable Model 1
IGA (reporting Model 1 FFIs) would satisfy their Chapter 4 requirements by
reporting specified information about U.S. accounts to their government,
followed by the automatic exchange of that information on a
government-to-government basis with the U.S. Under a Model 2 IGA , reporting
Model 2 FFIs would report specified information about U.S. accounts directly to
IRS in a manner consistent with the final regs (as modified by the applicable
Model 2 IGA), supplemented by a government-to-government exchange of
information on request. We're here to help! For no obligation free consultation
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