Retention of gross product. Under the proposed Regulations, starting in 2015, all withholding taxpayers, including foreign individuals, will be required to withhold 30% of the gross purchase price they pay for assets that generate income from the United States if the seller fails to demonstrate FATCA compliance. In contrast, model intergovernmental agreements do not require financial institutions in signatory countries to retain gross proceeds.9 This exemption may encourage non-compliant natural and legal persons to hold and sell assets through the financial institutions of the signatory country in order to avoid withholding gross proceeds. DISCLAIMER: The updated withholding tax (WP) and foreign trust (WT) withholding agreements have been published and published on the FATCA website. The two updated agreements are set out in the PDF of Revenue Procedure 2014-47, which updates and replaces the WP and WT agreements originally published under the title Revenue Procedure 2003-64, 2003-2 C.B. 306. Previously, there were few reliable estimates of the burden of additional costs for the U.S. Internal Revenue Service, although it seems certain that the bulk of the costs will likely fall on the financial institutions involved and (to a lesser extent) on foreign tax authorities that have signed intergovernmental agreements. [82] [83] The FATCA bill approved 800 additional IRS employees (costs are estimated at between $40 million and $160 million per year). According to a TIGTA report, the cost of developing the FATCA XML data website is $16.6 million ($2.2 million more than budgeted). However, the IRS also submitted a budget request of $37.1 million to fund the implementation of FATCA for 2013, including the cost of human auditors and agents dedicated to the application of FATCA, as well as IT development costs.

This budget request does not identify the appropriations necessary for implementation beyond the 2013 financial year”[84] The I.R.S. “has not been able to identify all potential costs beyond those of IT resources”. [84] Subsequent jurisdictions have also entered into “substantive agreements”[231] The second version of the intergovernmental agreement is Model Intergovernmental Agreement 2, which would require foreign institutions to report information directly to the IRS. Under such an intergovernmental agreement, IFFs must register with the IRS and some IFFs sign a version of the FFI agreement that has been adapted to the IGA. There are two types of agreements. The first agreement, known as model 1 DGA, would require foreign financial institutions (FRFIs) to report all FATCA-related information to their own government agencies, which would then report FATCA-related information to the U.S. government. Some Model 1 IGAs are reciprocal and require the United States to provide certain information about residents of model 1 country to Model 1 country in exchange for information that model 1 country provides to the United States. An FFI covered by a Model 1 IGA is not required to sign an FFI agreement, but must register on the IRS FATCA registration portal or file a Form 8957. However, given that foreign non-financial corporations are still required to report their 10% U.S.

ownership (instead of their controlling U.S. owners) to their counterparties under the proposed Regulations, these companies may be required to disclose their U.S. owners based on different criteria, depending on the status of their counterparty. For example, an unlisted foreign real estate investment trust or royalty trust that holds a financial account at a financial institution in the signatory country may be required to designate its majority U.S. owners so that the financial institution in the signatory country can meet its reporting obligations, but may also be required to disclose its U.S. owners at 10% to a U.S. borrower so that the borrower is not not obligated to: is to withhold interest payments in accordance with FATCA. to trust.

This result does not appear to have been intended by the authors of the model intergovernmental agreements, and we hope that the final regulation will support the control test of model agreements so that unlisted non-financial passive foreign companies can determine their reportable U.S. owners based on a single criterion for all FATCA purposes. IGA is simply an abbreviation for intergovernmental agreement. .