The implementation of The Standard for Automatic Exchange of Information – Lexology (registration)

via Common Reporting Standard Tax

(For the avoidance of doubt, I am not the author of this material. I am simply posting a link.)

The implementation of The Standard for Automatic Exchange of Information
Lexology (registration)
A key component in facilitating this exchange of information is the Common Reporting Standard (CRS). The CRS functions as a framework of detailed due diligence requirements, essentially setting out how accounts that will be required to report are

US “Reciprocity”: Might Critics Have to Eat Humble Pie and Get FAT(CA)?

via Let’s Talk About: US Tax

(For the avoidance of doubt, I am not the author of this material. I am simply posting a link.)

“FATCA”, the “Foreign Account Tax Compliance Act” also derisively known as “Fear And Terror Caused by America”  requires foreign (non-US) financial institutions, such as banks and brokerages, to search through their customer databases to identify US persons and to disclose significant information about their accounts. If the institution is located in a so-called Model 1 IGA jurisdiction, the disclosure must be made to the institution’s home country government for onward forwarding to the Internal Revenue Service (IRS).  If it is located in a Model 2 IGA jurisdiction, the information must be sent directly to the IRS pursuant to an agreement the entity must sign with the IRS.

FATCA has been held to blame for many problems (see here, here and here) and the United States has been harshly criticized for creating rules that are very one-sided in the exchange of financial information with foreign governments that have agreed to FATCA. It has been pointed out that even in the case of so-called “reciprocal” Model 1A Intergovernmental Agreements (IGA), the USA stands to receive volumes of information about US account holders in foreign financial institutions, but itself reveals nothing about the US accounts held by citizens and residents of the foreign IGA partners.

What’s Happening Now?

I recently corresponded with Professor Haydon Perryman on the US “reciprocity” issue.  In addition to Professor Perryman’s years of experience as a Chartered Management Accountant he has a detailed understanding of FATCA and the “Common Reporting Standard” (CRS also known as “GATCA”); is a principal author of every compliance officer’s bible, the Lexis/Nexis Guide to FATCA Compliance as well as an adjunct professor of the Risk Program of Texas A&M University School of Law. 

Professor Perryman himself has condemned the US for a lack of reciprocity on FATCA. See here  and here.  Having delved deeper into this issue of late, he advised that he is a little less sure of himself.  Thus, our discussion focused on whether the US stance toward (non)-reciprocity was showing any signs of change?  We have come to the conclusion that the data surprisingly indicates it has.  Here’s a summary:

Some Basics

It will be recalled there are two versions of the Model 1 IGA: so-called Model 1A and Model 1B.  

A Model 1A IGA provides for reciprocal information exchange between the United States and the partner jurisdiction.  The idea behind this type of agreement is a “tit for tat” exchange. In theory, the United States will provide information to the partner country about that country’s account holders in US financial institutions, and the signing partner will send the United States information about US account holders at that country’s financial institutions.

A Model 1B IGA is not reciprocal. Only the signing partner country will send information about US account holders at that country’s financial institutions over to the US.  Typically, the country signing a Model 1B IGA has no need for information about financial accounts of its nationals or residents since the country imposes no income tax or has only a territorial income tax.

The Model 1A IGAs generally provide that the relevant foreign government will enter into agreements or arrangements with the US to establish procedures for the automatic exchange of information as mandated in the IGA (e.g., information on reportable accounts and data regarding payments made to nonparticipating foreign financial institutions etc.) and prescribe rules and procedures to implement the collaboration, compliance, and enforcement terms of the IGA.  This is being accomplished through the negotiation and signing of what is called a “Competent Authority Agreement”, or CAA.

Growing Fast – FATCA “Competent Authority Agreements”

The CAAs essentially expand upon key provisions of the IGAs. For example, they confirm the intent to exchange information within nine months after the end of a calendar year; spell out procedures and formats for the exchange of information required, detail the process for feedback and consultation between the signatories to ensure data quality etc. 

Significantly, it must be remembered that simply having a CAA in place is not the same thing as requiring US financial institutions to report FATCA/IGA-related information either to the IRS or to the IGA foreign partner.  More on this, below.  However, having the CAA in place seems to be a sine qua non for US reciprocity.  In the words of Professor Perryman, the FATCA CAA is a kind of “proxy” for the USA’s “intent to reciprocate”; without it, there is no manifested intention to reciprocate data exchange.

Professor Perryman compiled a lot of data that he shared with me.  From this data (current to September 8, 2016), I examined the “reciprocal” IGA jurisdictions.  That is, I looked at how many countries have a Model 1A IGA currently “in force”. I removed any Model 1A IGA country that did not have its IGA currently in effect.

Bear in mind a country could have signed an IGA, but it is not yet considered to be “in force”. Many partner jurisdictions that have signed IGAs or reached an agreement in substance on the text of an IGA continue to work through their internal procedures to bring the IGA into force, a delay that is making Treasury very unhappy and caused it to issue the latest ultimatum in July for any FATCA laggards.  You can access the list here to determine which jurisdictions are treated as having an IGA “in force.” 

According to Professor Perryman’s data, the total number of countries with a Model 1A IGA currently in force is 44. Of these 44 countries, 39[1] have negotiated a FATCA CAA with the US (that is over 88%; not a shabby number).  I was surprised that such a large number existed.[2]  Despite this high percentage indicating reciprocity for Model 1A FATCA agreements, Professor Perryman rightly points out that this “is by no means a proxy for CRS compliance”.  We both believe the US’ refusal to join the CRS is telling; but that is a story for another day.

As an aside, what surprised me even more is that of the 113 countries agreeing to FATCA, only 63 countries currently have an IGA “in force”.  Given the fact that there are 195 countries in the world (and as pointed out to me by Professor Perryman, 251 tax jurisdictions recognized by the US for FATCA purposes , FATCA still has a long road to travel.  And one can’t help but wonder about the future of FATCA if foreign financial institutions find a way to deal only with one another through block chain technology, effectively stonewalling the US.

“Reciprocity” Standstill

Again, the mere signing of the CAA does not require US financial institutions to provide financial account data about foreign customers to the IRS or to the foreign IGA partner.  The FATCA “reciprocity” standstill is the direct result of the fact that the USA does not have any implementing legislation mandating that US financial institutions gather and send financial account information about foreign customers. A recent exception to information gathering now exists with respect to interest earned by nonresident alien individuals at US financial institutions, but only when the individual is a resident of certain countries. Reports of the interest payments must annually be made by the institution to the IRS (not to any foreign country).

I do see the “reciprocity” trend as changing.  The USA is clearly trying to implement mechanisms in order that financial information can be obtained and stored in the IRS labyrinth of computers so I would imagine, as to be transmissible to a foreign country partner at the click of a mouse. The latest development is FinCEN’s promulgation of the Customer Due Diligence rules  to obtain information about beneficial owners of US shell companies (think Delaware, Nevada, Wyoming) and in a similar vein, the IRS Proposed Regulations regarding filing of Form 5472 for certain US “disregarded entities” owned by foreigners.

Slowly but surely, advances are being made by the US as it inches its way closer to reciprocity. It remains to be seen, though, if the FATCA “reciprocity” critics will be eating humble pie any day soon.  


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[1] Australia







Czech Republic


















Isle of Mann













New Zealand





St. Vincent & Grenadines



South Africa 




United Kingdom 


 [2] The five remaining countries with an “effective” Model 1A IGA but lacking a CAA are Azerbaijan, Canada, Jersey, Lithuania and Poland.


Court approves law targeting Americans living in Israel

On Monday the Israeli Supreme Court upheld a law giving US tax authorities access to Israeli bank account information, rejecting claims by petitioners that the law violated personal privacy rights.



FATCA Delays Would Cause ‘Severe’ Damage, Israel Says

via Google Alert – FATCA

(For the avoidance of doubt, I am not the author of this material. I am simply posting a link.)

“Worldwide financial institutions would also hesitate to work with institutions regarded as not in compliance with FATCA,†the government added.

£3 billion collected from users of tax avoidance schemes

via HMRC working with tax agents

(For the avoidance of doubt, I am not the author of this material. I am simply posting a link.)

This week you may have seen in the media that HMRC reached a major milestone in tackling tax avoidance.

Over the last 2 years, £3 billion has been collected from users of avoidance schemes by means of accelerated payment notices. Since being introduced in 2014, more than 60,000 notices have been issued. These notices are issued to users of schemes subject to the Disclosure of Tax Avoidance Schemes (DOTAS) rules or the General Anti-Abuse Rule (GAAR), or to users of similar schemes which have been defeated in litigation. The money has to be paid upfront meaning that scheme users can no longer avoid paying through lengthy, drawn out legal challenges.

With HMRC winning almost 90% of the avoidance litigation cases decided in 15/16, many users of avoidance schemes choose to settle their tax bills long before they get to this point. £2 billion of avoided tax was settled in the last year alone.

Over the last Parliament, the Government made more than 40 changes to the law to combat tax avoidance, closing down loopholes and introducing major reforms to the UK tax system. A further 15 measures have been announced since May 2015.

HMRC is coming down hard on tax avoidance and actively encourages anyone wishing to settle an avoidance issue to contact us without delay to minimise the financial impact and to pay their fair share of tax due.



UK Launches World Disclosure Facility –

via Common Reporting Standard Tax

(For the avoidance of doubt, I am not the author of this material. I am simply posting a link.)

UK Launches World Disclosure Facility
The UK Government has launched a new Worldwide Disclosure Facility (WDF), which will offer a "final chance" to those with undeclared offshore income and assets ahead of the adoption of the Common Reporting Standard (CRS). … An offshore issue includes

and more »

US bank Wells Fargo fined $185m for opening illegal accounts

via BBC News – Business

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A man walks past a Wells Fargo branch

Image copyright
Ben Margot

Image caption

Wells Fargo has been fined $185m

The US’ biggest bank Wells Fargo has been fined $185m for illegally opening accounts to boost sales targets.

The cash will go to regulators while the bank will also hand back $5m to customers.

It was found guilty of “widespread illegal practice” around account openings, sales targets and compensation incentives.

“We regret instances where customers may have received a product that they did not request,” the bank said.

The US Consumer Financial Protection Bureau (CSFB) announced the fine and said the bank must also hire an independent consultant for a review.

“Because of the severity of these violations, Wells Fargo is paying the largest penalty the CFPB has ever imposed,” said Richard Cordray, director of the regulator.

Its investigation found that to meet sales targets and possibly gain more compensation bank workers had “illegally” signed up customers for more than 2 million deposit and credit-card accounts.

Employees also issued debit cards without customers’ knowledge, even creating fake email addresses to unknowingly sign up consumers to online-banking services, the regulator said. Wells Fargo said it set up an independent review of its sales practices dating back to 2011 and had taken “disciplinary actions, including terminations of managers and team members who acted counter to our values”.

FATCA Reporting Under Assault in U.S. House Legislation

via Google Alert – FATCA

(For the avoidance of doubt, I am not the author of this material. I am simply posting a link.)

Long the target of controversy, FATCA requires overseas banks to tell the Internal Revenue Service about these accounts or face a potential 30 …

OECD Secretary-General’s tax report to G20 Leaders (September 2016)

via – Tax

(For the avoidance of doubt, I am not the author of this material. I am simply posting a link.)

This report consists of two parts. Part I is a report by the OECD Secretary-General regarding (A) the G20/OECD Base Erosion and Profit Shifting (BEPS) Project; (B) Tax transparency; (C) Tax policy tools to support sustainable and inclusive growth; and (D) Tax and development. Part II is a Progress Report to the G20 by the Global Forum on Transparency and Exchange of Information for Tax Purposes.