For those wondering what FATCA and CRS mean…CRS is Common Reporting Standards…FATCA is the Foreign Account Tax Compliance Act (which was passed as part of the HIRE Act)
FATCA generally requires that non-US financial Institutions and certain other non-financial entities report on the assets held by their U.S. account holders or be subject to a 30% withholding tax on withholdable payments. The HIRE Act also contained legislation requiring U.S. persons to report, depending on the value, their foreign financial accounts and foreign assets.
HIRE is the Hiring Incentives to Restore Employment (HIRE) Act.
The UK signed an intergovernmental agreement (IGA) with the U.S. on September 14, 2012. It was the first IGA signed with the U.S. and has become the basic model for most countries to follow. The UK IGA is a reciprocal agreement, where the UK and the U.S. will reciprocate information about their citizens’ investments in foreign countries.
Pursuant to the UK IGA, U.S. withholding tax will not be imposed on UK Financial Institutions (“FIs”), nor will UK FIs be required to remit the 30% withholding tax associated with FATCA, provided that the UK FIs comply with the reporting obligations associated with U.S. account holders. Those UK FIs in compliance will be considered a reporting UK financial institution (“RUKFI”).
On 17 June 2013, G8 leaders presented a report concluding that the FATCA Model 1 IGA was a logical basis from which to build a standardized model for the OECD automatic information exchange initiative. There are various models including 1, 1A, 2 etc, both reciprocal and non-reciprocal. The prefered model is reciprocal as implemented in the UK.
Over 50 European, Western and other countries have passed or are in the process of passing Intergovernmental Agreements with the U.S. ensuring tax avoidance by U.S. citizens is minimized in most regions of the world.