Which Nations Have IGAs with the United States?

Anyone who has followed international tax news over the past several years s likely to have encountered the acronyms FATCA and IGA. These terms represent two related tools that IRS agents and prosecutors from the Department of Justice can utilize to enforce the U.S. Tax Code and prosecute those who attempt to use offshore accounts, trusts, and other entities to conceal income.

Since the FATCA passed and its corresponding IGAs went into effect, the risk of detection of concealed accounts has never been higher. If an undisclosed offshore account is detected, the account holder can be subject to harsh civil or criminal penalties.

What is FATCA?

FATCA or Foreign Account Tax Compliance Act is a law that requires compliance by both foreign financial institutions and by individual taxpayers. FATCA requires U.S. taxpayers to disclose an array of foreign financial accounts and assets including deposit accounts, custodial accounts, foreign life insurance policies, foreign partnership interests, and foreign stocks.

For U.S. taxpayers living in the United States holding covered foreign accounts,  the FATCA reporting threshold is passed when the balance of the account or accounts is $50,000. Individuals that file jointly or are living outside of the United States are subject to increased thresholds before a FATCA disclosure is required. The failure to report covered accounts can result in significant fines and other civil and criminal tax consequences.

Foreign financial institutions are also required to make certain disclosures under FATCA. Generally, these foreign financial institutions must disclose information about U.S-linked accounts according to terms of the IGA in effect in the jurisdiction. Failure to provide this information to the local taxing authority or to the IRS can result in a 30 percent withholding penalty being assessed against the bank’s U.S. assets.

What is an IGA?

IGA is simply shorthand for intergovernmental agreement. To implement FATCA, the United States government has developed two forms of IGAs: Model 1 agreements and model 2 agreements. Under a Model 1 agreement, foreign financial institutions report information about U.S. linked accounts to their domestic national taxing authority. The national taxing authority then passes that information along to the U.S. government. Many Model 1 IGAs also include an Annex II that lists country-specific deemed compliant financial institutions. Model 2 IGAs addressed concerns in some nations that the FATCA regime could violate local or national laws. Under a Model 2 agreement the financial instiution can provide information directly to the IRS.

Which nations have an IGA with the United States?

Countries with a Model 1 or Model 2 IGA already signed and in effect include:

Foreign governments that have reached an agreement in substance with the U.S. government, but have not yet formally signed the agreement are:

As these lists make clear, most countries in the world have agreed to an IGA with the United States. In fact, more than 110 nations have signed or agreed to an IGA with the United States. This means that your undisclosed offshore accounts are more likely than ever to be discovered. Concealment of income and offshore accounts can result in criminal tax charges.

If you have offshore account concerns, call US Tax Help today at (541) 923-0903 or contact us online. CPA Ted Kleinman can help you get a handle on your taxes and can work to correct problems created by offshore accounts.