Treasury Again Updates Model 2 FATCA Agreement for Countries With TIEAs, Double-Tax Conventions

 

a) The term "United States" means the United States of America, including the States thereof, but does not include the U.S. Territories. Any reference to a "State " of the United States includes the District of Columbia.²

b) The term "U.S. Territory" means American Samoa, the Commonwealth of the Northern Mariana Islands, Guam, the Commonwealth of Puerto Rico, or the U.S. Virgin Islands.

c) The term "IRS" means the U.S. Internal Revenue Service.

d) The term "[FATCA Partner]" means [full name of FATCA Partner] [, including ____] [, but not including ____].³

e) The term "Partner Jurisdiction" means a jurisdiction that has in effect an agreement with the United States to facilitate the implementation of FATCA. The IRS shall publish a list identifying all Partner Jurisdictions.

f) The term "Competent Authority" means:

 

g) The term "Financial Institution" means a Custodial Institution, a Depository Institution, an Investment Entity, or a Specified Insurance Company.

h) The term "Foreign Reportable Amount " means, in accordance with relevant U.S. Treasury Regulations, a payment of fixed or determinable annual or periodical income that would be a withholdable payment if it were from sources within the United States.

i) The term "Custodial Institution" means any Entity that holds, as a substantial portion of its business, financial assets for the account of others. An entity holds financial assets for the account of others as a substantial portion of its business if the entity's gross income attributable to the holding of financial assets and related financial services equals or exceeds 20 percent of the entity's gross income during the shorter of: (i) the three-year period that ends on December 31 (or the final day of a non-calendar year accounting period) prior to the year in which the determination is being made; or (ii) the period during which the entity has been in existence.

j) The term "Depository Institution" means any Entity that accepts deposits in the ordinary course of a banking or similar business.

k) The term "Investment Entity" means any Entity that conducts as a business (or is managed by an entity that conducts as a business) one or more of the following activities or operations for or on behalf of a customer:

 

l) The term "Specified Insurance Company" means any Entity that is an insurance company (or the holding company of an insurance company) that issues, or is obligated to make payments with respect to, a Cash Value Insurance Contract or an Annuity Contract.

m) The term "[FATCA Partner] Financial Institution" means (i) any Financial Institution [resident in]/[organized under the laws of]⁵ [FATCA Partner], but excluding any branch of such Financial Institution that is located outside [FATCA Partner], and (ii) any branch of a Financial Institution not [resident in]/[organized under the laws of] [FATCA Partner], if such branch is located in [FATCA Partner].

n) The term "Partner Jurisdiction Financial Institution" means (i) any Financial Institution established in a Partner Jurisdiction, but excluding any branch of such Financial Institution that is located outside the Partner Jurisdiction, and (ii) any branch of a Financial Institution not established in the Partner Jurisdiction, if such branch is located in the Partner Jurisdiction.

o) The term "Reporting [FATCA Partner] Financial Institution" means any [FATCA Partner] Financial Institution that is not a Non-Reporting [FATCA Partner] Financial Institution.

p) The term "Non-Reporting [FATCA Partner] Financial Institution" means any [FATCA Partner] Financial Institution, or other Entity resident in [FATCA Partner], that is described in Annex II as a Non-Reporting [FATCA Partner] Financial Institution or that otherwise qualifies as a deemed-compliant FFI or an exempt beneficial owner under relevant U.S. Treasury Regulations [in effect on the date of signature of this Agreement].⁶

q) The term "Nonparticipating Financial Institution" means a nonparticipating FFI, as that term is defined in relevant U.S. Treasury Regulations, but does not include a [FATCA Partner] Financial Institution or other Partner Jurisdiction Financial Institution other than a Financial Institution treated as a Nonparticipating Financial Institution pursuant to paragraph 2 of Article 4 of this Agreement or the corresponding provision in an agreement between the United States and a Partner Jurisdiction.

r) The term "New Account" means a Financial Account opened by a Reporting [FATCA Partner] Financial Institution on or after July 1, 2014.

s) The term "U.S. Account" means a Financial Account maintained by a Reporting [FATCA Partner] Financial Institution and held by one or more Specified U.S. Persons or by a Non-U.S. Entity with one or more Controlling Persons that is a Specified U.S. Person. Notwithstanding the foregoing, an account shall not be treated as a U.S. Account if such account is not identified as a U.S. Account after application of the due diligence procedures in Annex I.

t) The term "Non-Consenting U.S. Account" means a Financial Account maintained by a Reporting [FATCA Partner] Financial Institution as of June 30, 2014 with respect to which (i) a Reporting [FATCA Partner] Financial Institution has determined that it is a U.S. Account in accordance with the due diligence procedures in Annex I, (ii) the laws of [FATCA Partner] prohibit the reporting required under an FFI Agreement absent consent of the Account Holder, (iii) the Reporting [FATCA Partner] Financial Institution has sought, but was unable to obtain, the required consent to report or the Account Holder's U.S. TIN; and (iv) the Reporting [FATCA Partner] Financial Institution has reported, or was required to report, aggregate account information to the IRS as prescribed under sections 1471 to 1474 of the U.S. Internal Revenue Code and relevant U.S. Treasury Regulations.

u) The term "Financial Account" has the meaning set forth in relevant U.S. Treasury Regulations, but does not include any account that is excluded from the definition of Financial Account in Annex II.

v) The term "FFI Agreement" means an agreement that sets forth the requirements, consistent with this Agreement, for the Reporting [FATCA Partner] Financial Institution to be treated as complying with the requirements of section 1471(b) of the U.S. Internal Revenue Code.

w) The term "Account Holder " means the person listed or identified as the holder of a Financial Account by the Financial Institution that maintains the account. A person, other than a Financial Institution, holding a Financial Account for the benefit or account of another person as agent, custodian, nominee, signatory, investment advisor, or intermediary, is not treated as holding the account for purposes of this Agreement, and such other person is treated as holding the account. For purposes of the immediately preceding sentence, the term "Financial Institution" does not include a Financial Institution organized or incorporated in a U.S. Territory. In the case of a Cash Value Insurance Contract or an Annuity Contract, the Account Holder is any person entitled to access the Cash Value or change the beneficiary of the contract. If no person can access the Cash Value or change the beneficiary, the Account Holder is any person named as the owner in the contract and any person with a vested entitlement to payment under the terms of the contract. Upon the maturity of a Cash Value Insurance Contract or an Annuity Contract, each person entitled to receive a payment under the contract is treated as an Account Holder.

x) The terms "Cash Value Insurance Contract" and "Annuity Contract" have the meanings set forth in relevant U.S. Treasury Regulations.

y) The term "U.S. Person" means a U.S. citizen or resident individual, a partnership or corporation organized in the United States or under the laws of the United States or any State thereof, a trust if (i) a court within the United States would have authority under applicable law to render orders or judgments concerning substantially all issues regarding administration of the trust, and (ii) one or more U.S. persons have the authority to control all substantial decisions of the trust, or an estate of a decedent that is a citizen or resident of the United States. This subparagraph 1(y) shall be interpreted in accordance with the U.S. Internal Revenue Code.

z) The term "Specified U.S. Person" means a U.S. Person, other than: (i) a corporation the stock of which is regularly traded on one or more established securities markets; (ii) any corporation that is a member of the same expanded affiliated group, as defined in section 1471(e)(2) of the U.S. Internal Revenue Code, as a corporation described in clause (i); (iii) the United States or any wholly owned agency or instrumentality thereof; (iv) any State of the United States, any U.S. Territory, any political subdivision of any of the foregoing, or any wholly owned agency or instrumentality of any one or more of the foregoing; (v) any organization exempt from taxation under section 501(a) of the U.S. Internal Revenue Code or an individual retirement plan as defined in section 7701(a)(37) of the U.S. Internal Revenue Code; (vi) any bank as defined in section 581 of the U.S. Internal Revenue Code; (vii) any real estate investment trust as defined in section 856 of the U.S. Internal Revenue Code; (viii) any regulated investment company as defined in section 851 of the U.S. Internal Revenue Code or any entity registered with the U.S. Securities and Exchange Commission under the Investment Company Act of 1940 (15 U.S.C. 80a-64); (ix) any common trust fund as defined in section 584(a) of the U.S. Internal Revenue Code; (x) any trust that is exempt from tax under section 664(c) of the U.S. Internal Revenue Code or that is described in section 4947(a)(1) of the U.S. Internal Revenue Code; (xi) a dealer in securities, commodities, or derivative financial instruments (including notional principal contracts, futures, forwards, and options) that is registered as such under the laws of the United States or any State; or (xii) a broker as defined in section 6045(c) of the U.S. Internal Revenue Code.

aa) The term "Entity" means a legal person or a legal arrangement such as a trust.

bb) The term "Non-U.S. Entity" means an Entity that is not a U.S. Person.

cc) An Entity is a "Related Entity" of another Entity if either Entity controls the other Entity, or the two Entities are under common control. For this purpose, control includes direct or indirect ownership of more than 50 percent of the vote or value in an Entity. Notwithstanding the foregoing, [FATCA Partner] may treat an Entity as not a Related Entity of another Entity if the two Entities are not members of the same expanded affiliated group as defined in section 1471(e)(2) of the U.S. Internal Revenue Code.

dd) The term "U.S. TIN" means a U.S. federal taxpayer identifying number.

ee) The term "Controlling Persons" means the natural persons who exercise control over an Entity. In the case of a trust, such term means the settlor, the trustees, the protector (if any), the beneficiaries or class of beneficiaries, and any other natural person exercising ultimate effective control over the trust, and in the case of a legal arrangement other than a trust, such term means persons in equivalent or similar positions. The term "Controlling Persons" shall be interpreted in a manner consistent with the Financial Action Task Force Recommendations.

 

a) register on the IRS FATCA registration website with the IRS by July 1, 2014, and comply with the requirements of an FFI Agreement, including with respect to due diligence, reporting, and withholding;

b) with respect to Financial Accounts maintained by Reporting [FATCA Partner] Financial Institutions as of June 30, 2014 identified as U.S. Accounts,

 

c) with respect to accounts of, or obligations to, Nonparticipating Financial Institutions that exist as of June 30, 2014, and in connection with which the Reporting [FATCA Partner] Financial Institution expects to pay a Foreign Reportable Amount,

 

d) with respect to New Accounts identified as U.S. Accounts, obtain from each Account Holder consent to report, consistent with the requirements of an FFI Agreement, as a condition of account opening; and

e) with respect to new accounts opened by, or obligations entered into with, a Nonparticipating Financial Institution on or after July 1, 2014, and in connection with which the Reporting [FATCA Partner] Financial Institution expects to pay a Foreign Reportable Amount, obtain from each such Nonparticipating Financial Institution consent to report, consistent with the requirements of an FFI Agreement, as a condition of opening the account, or entering into the obligation.

 

a) In the context of FATCA implementation, the U.S. Competent Authority may make group requests to the [FATCA Partner] Competent Authority based on the aggregate information reported to the IRS pursuant to the directive described in subparagraphs 1(b)(ii) and 1(c)(ii) of this Article, for all the information about Non-Consenting U.S. Accounts and Foreign Reportable Amounts paid to Nonparticipating Financial Institutions that the Reporting [FATCA Partner] Financial Institution would have had to report under an FFI Agreement had it obtained consent. Such requests shall be made pursuant to Article [ ]⁹ of the [Convention/TIEA] and shall apply to information for the time period beginning on or after the date of signature of this Agreement.

b) The information requested pursuant to subparagraph 2(a) of this Article shall be considered information that [may be relevant]/[is foreseeably relevant]/[is necessary]¹⁰ for carrying out the administration or enforcement of the domestic laws of the United States concerning taxes covered by the [Convention/TIEA] and under which taxation is not contrary to the [Convention/TIEA], without regard to whether the Reporting [FATCA Partner] Financial Institution or another party has contributed to non-compliance of the taxpayers in the group request.

c) The [FATCA Partner] Competent Authority shall, within six months of the receipt of the group request, provide the U.S. Competent Authority with all such requested information in the same format in which the information would have been reported if it had been reported directly to the IRS by the Reporting [FATCA Partner] Financial Institution. The [FATCA Partner] Competent Authority shall notify the U.S. Competent Authority and the relevant Reporting [FATCA Partner] Financial Institution if there will be any delay in the exchange of the requested information. In such case, the provisions of subparagraph 2(b) of Article 3 of this Agreement shall apply with respect to the Reporting [FATCA Partner] Financial Institution, and the [FATCA Partner] Competent Authority must exchange the requested information with the U.S. Competent Authority as soon as possible.

d) Notwithstanding subparagraph 2(c) of this Article, the [FATCA Partner] Competent Authority is not required to obtain and exchange the U.S. TIN of the Account Holder of a Non-Consenting U.S. Account if such U.S. TIN is not in the records of the Reporting [FATCA Partner] Financial Institution. In such a case, the [FATCA Partner] Competent Authority shall obtain and include in the exchanged information the date of birth of the relevant person, if the Reporting [FATCA Partner] Financial Institution has such date of birth in its records.

 

a) Subject to subparagraph 2(b) of this Article, the United States shall not require a Reporting [FATCA Partner] Financial Institution to withhold tax under section 1471 or 1472 of the U.S. Internal Revenue Code with respect to an account held by a recalcitrant account holder (as defined in section 1471(d)(6) of the U.S. Internal Revenue Code), or to close such account, if:

 

b) If the condition of subparagraph 2(a)(ii) of this Article is not fulfilled, the Reporting [FATCA Partner] Financial Institution shall be required to treat the account as held by a recalcitrant account holder as defined in relevant U.S. Treasury Regulations, including by withholding tax where required by those U.S. Treasury Regulations, beginning on the date that is six months after the date of the receipt of the request described in subparagraph 2(a) of Article 2 of this Agreement and ending on the date on which the [FATCA Partner] Competent Authority exchanges the requested information with the U.S. Competent Authority.

 

a) the [FATCA Partner] Financial Institution treats each such Related Entity or branch as a separate Nonparticipating Financial Institution and each such Related Entity or branch identifies itself to withholding agents as a Nonparticipating Financial Institution;

b) each such Related Entity or branch identifies its U.S. accounts and reports to the IRS the information with respect to those accounts as required under section 1471 of the U.S. Internal Revenue Code to the extent permitted under the relevant laws pertaining to the Related Entity or branch; and

c) such Related Entity or branch does not specifically solicit U.S. accounts held by persons that are not resident in the jurisdiction where such Related Entity or branch is located or accounts held by Nonparticipating Financial Institutions that are not established in the jurisdiction where such Related Entity or branch is located, and such Related Entity or branch is not used by the [FATCA Partner] Financial Institution or any other Related Entity to circumvent the obligations under this Agreement or under section 1471 of the U.S. Internal Revenue Code, as appropriate.

 

a) establish the procedures for the exchange of information described in paragraph 2 of Article 2 of this Agreement; and

b) prescribe rules and procedures as may be necessary to implement this Article.]¹³