On December 21, 2012 the USA and Ireland signed a FATCA agreement. We earlier discussed what is FATCA. This IGA has a profound impact due to many Irish citizens living in the USA and American expats in Ireland. This FATCA agreement is based on the reciprocal Model I government-to-government approach to implementing the Foreign Account Compliance Act.
This is the fourth FATCA agreement signed in 2012 by the USA. On September 12, 2012 the USA signed the intergovernmental agreement (IGA) with the United Kingdom. FATCA agreement with Denmark was signed on November 15, 2012 and another one with Mexico on November 19. The USA has also initiated a reciprocal Model I FATCA with Spain and a Model II IGA with Switzerland.
Let’s review some major points of this Foreign Account Compliance Act that American expats in Ireland must consider.
When will this FATCA agreement come into effect?
The effective date for this IGA is January 1, 2013 or the date on which both countries have notified each other about the completion of the necessary internal procedures.
There are a lot of similarities among all signed FATCA agreements.
- Irish financial institutions will be required to exchange year-end account balances of US accounts holders. Average account balance must be provided in case of Mexican Foreign Account Compliance Act.
- Competent authorities can contact a financial institution in another country directly in case of minor or administrative errors. This is not allowed in case of Mexican FATCA agreement.
Which financial institutions are exempt under this FATCA?
Per Annex II of the Irish FATCA agreement there are several types of institutions and products that get a preferential treatment because they are unlikely to be used by Americans to evade US tax:
Exempt beneficial owners include:
- Irish government and its political subdivisions
- Any owned agency of three governmental entities
- Central Bank and Financial Services Authority of Ireland
- Irish offices of some international organizations
- Retirement funds described in article 4(1)(c) of the Ireland-U.S. tax treaty.
Deemed-compliant financial institutions include:
- Some financial institutions with a local client base
- Some Irish nonprofit organizations
- Some collective investment vehicles
Exempt products include:
- Some Irish retirement accounts/products
- Some tax-favored accounts/products.
This FATCA agreement is flexible in nature. Article 8 affirms that consultations will be extended if any difficulties arise during the implementation process. Article 9 confirms that the annexes are an integral part of this Foreign Account Compliance Act.
American expats in Ireland must remember that there are different FATCA filing threshold requirements for expats who reside overseas vs in the USA.
Conclusion
American expats in Ireland who need guidance with new FATCA requirements must contact a US expatriate tax professional that provides international tax services. International tax experts will assist you with FATCA and expatriate tax return issues.