Executive summary
On 20th March 2019, the Irish Tax and Customs published the official text of the Competent Authority Agreement (CAA) signed with the US to update Annex II of the Intergovernmental Agreement (IGA) to implement FATCA.
The agreement adds new subsections “D” and “E” to section II (Deemed-Compliant Financial Institutions) of Annex II of the IGA to include additional entities as Non-Reporting Irish Financial Institutions (FIs) that are treated as deemed-compliant FFIs for purposes of section 1471 of the Internal Revenue Code.
Background
When the US Treasury started signing IGAs with jurisdictions to implement FATCA in 2012, some of the early adopters signed a version of the agreement that didn’t deal with some FATCA definitions, such as “Sponsored Entities.” Ireland was one of these early adopters, in addition to Denmark, France, Germany, Italy, Mexico, The Netherlands, Norway, Spain, and the UK. These definitions were later added on to subsequent versions of the IGA.
Therefore, Sponsored Entities in these 10 jurisdictions were considered needing to comply with their obligations under the terms of the US Treasury Regulations, as opposed to the IGA. Consequently, they were required to make RO FATCA certifications and to file FATCA reports on Form 8966 directly with the IRS rather than reporting to the Model 1 jurisdiction’s tax authority.
This update on the Annex II of Ireland’s IGA is a result of several discussions between the Irish Fund industry and Irish Revenue AEOI team carried on during the past year.
Irish Revenue confirmed that they were aware of the issues created by this inconsistency in the IGA and the impact created on some Financial Institutions and advised that they were having discussions with the IRS to put a bi-lateral agreement in place to ensure that Ireland has the same provisions as the later IGAs. One of the reasons of the delay on the release of the CAA was the US Government shutdown which happened earlier in the year. Of the ten jurisdictions mentioned and other than Ireland, only the UK has also amended its IGA to ensure ‘deemed-compliant’ status for its sponsored entities.
Additional details of the CAA can be found at the following link on the Irish Revenue portal:
https://www.revenue.ie/en/companies-and-charities/documents/aeoi/ireland-usa-caa.pdf
Implications
Under this update, Sponsored Investment entities are now considered deemed-compliant FFIs, and as such are no longer required to file Form 8966, or to make Responsible Officer (RO) certifications to the IRS.
The CAA provides a retrospective application of the update enabling Irish Sponsored Entities to avoid having to certify their FATCA compliance to the IRS by 31 March 2019, which was required prior to the update.
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