The US government agreed to treat India’s intergovernmental agreement (IGA) as completed for purposes of the Foreign Accounts Tax Compliance Act (FATCA).
India, whose IGA is said to be agreed “in substance”, negotiated a “Model I” type agreement – meaning India-based firms will report tax information on any US account holders to local authorities, who will then share that information with the US. In return, the US Internal Revenue Service will collect and share data on Indian account holders in the US.
FATCA requires non-US financial firms to report the holdings of US clients or suffer withholding tax on payments travelling out of the US.
India joined 20 other countries which reached IGAs “in substance” earlier this month. Since then Australia has gone on to formally sign its Model I IGA.
Before these agreements, many non-US GPs reached a roadblock in their FATCA compliance action plans because it was unclear what type reporting agreement their local government would sign with the US.
But despite the additional FATCA agreements, some major private equity activity centers still have yet to sign FATCA papers with the US. G20 countries without a FATCA intergovernmental agreement are: Argentina, China, South Korea, Indonesia, Russia, Turkey and Saudi Arabia.
GPs and other foreign financial firms covered by the law have until May 5 to register with US tax authority the Internal Revenue Service ahead of the law’s July 1 go-live date.