Malta and US conclude FATCA negotiations
07 August 2013
Posted by: Author: CSB group
Author: CSB Group
As recently reported, Malta
and the US concluded negotiations relating to an Intergovernmental Agreement
(IGA) in relation to US FATCA regulations (FATCA).
Enacted in 2010 by the US
Congress as part of the Hiring Incentives to Restore Employment (HIRE) Act,
FATCA requires non-US financial institutions to report to the US Internal
Revenue Service (IRS) information about financial accounts held by US
taxpayers, or by non-US entities in which US taxpayers hold a substantial
The IGA has been negotiated on
the basis of the latest Model 1 IGA (reciprocal version) issued by the US. The
basic purpose of this IGA is to ensure financial institutions (eg banks), which
are resident (or carrying on business) in Malta or the US, will to comply with
certain prescribed reporting obligations.
Financial institutions in both
Malta and the US will be required by the IGA to submit the required information
to their own tax authorities, which in turn will automatically share such
information with the other tax authority. Such shared information will be used
by the Maltese and US tax authorities in order to ensure that the relevant tax
laws of the two countries are being complied with.
Financial institutions that
are resident or operating in Malta and that comply with the terms of the IGA
will benefit in that they will not be subject to the FATCA 30 percent
withholding tax on the payments they receive. The IGA is also intended to
reduce the administrative burden of complying with the FATCA regulations as
well as to provide a mechanism for Malta financial institutions to comply with
their obligations without breaching the data protection laws.
Both countries aim to sign the agreement as soon