ALERT: Updated Withholding Foreign Partnership (WP) and Withholding Foreign Trust (WT) Agreements have been published and published on the FATCA website. The two updated agreements are presented in the 2014-47 PDF Income Procedure, which updates and replaces the WP and WT agreements, originally published as the 2003-64 income procedure, 2003-2 C.B 306. Appendix II appears to ignore certain categories of tax-exempt businesses or businesses that are considered compliant and are listed in The Model 1 Schedule. The significance of this omission is not yet clear. In addition, the timing and mechanism for resolving specific issues dealt with under the Model 1 mutual unification procedures remain vague in Model 2. Although Model 2, for example, implies the obligation to cooperate in developing an administrative approach to Passthru payments, unlike Model 1, there is no obligation to participate in such a consultation at any given time. For more information on model IGAs, autographed IGAs and IGA negotiating contact information, visit the Ministry of Finance`s FATCA IGA Resource Center. Craig Cohen is a senior counsel and John Hibbard is a partner at Allen -Overy LLP. In this article, the authors discuss the fatca withholding rules that apply to financial institutions in the intergovernmental legal orders of Model 2. Model 2 FFI are required, in accordance with the provisions of each IGA, to register with the IRS and comply with the provisions of the FFI agreement. The FFI agreement defines Faffi`s Obligations in Model 2 with respect to the identification and documentation of financial account holders, as well as procedures for direct notification to the IRS of information relating to certain account holders. This direct reporting requirement is often described as the main feature of IGA Models 2 and 1, which allows reporting to a local tax authority rather than the IRS.

However, in the structuring of cross-border transactions, the most important difference between model IGAs is the treatment of fatca withholding tax. With respect to the analysis of source tax risk on cross-border transactions, in accordance with the Foreign Account Tax Compliance Act, the market has generally focused on the treatment of parties in jurisdictions that are considered a Model 1 intergovernmental agreement with the United States.

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