These RSIs are required to report annually to their national tax authorities on accounts to be reported for having passed them on to the IRS. The national tax administration regulates these ffis in accordance with its national law; they are not subject to an FFI agreement with the IRS. Model 1 IGA is available in a reciprocal version (model 1A) and a non-reciprocal version (Model 1B). The United States will also exchange tax information with partners under the Model 1A agreement. In essence, the intergovernmental agreement between HK-USA does not go within the scope of the AIA. Rather, it falls within the scope of the exchange of information on demand (EOIR). Under the IRS framework, a reporting financial institution is required to report financial account information to the tax administration of the jurisdiction in which it resides (with the exception of a branch outside that jurisdiction) or a branch if the financial institution is established in another jurisdiction. The tax administration automatically communicates relevant information to the partner jurisdiction with which there is a double taxation agreement (DTT) or an agreement on the exchange of tax information (TIEA). A financial institution reporting under the IRS does not have withholding obligations, whereas, under model ii-IGA, a reporting foreign institution is required to withhold taxes on payments of income from U.S. sources to non-consensual account holders if the tax department does not respond to U.S. requests for non-consenting account holders under the DBA or the Tax Exchange Agreement. In addition to our article „Updates on impact of FATCA final regulations on ORSO/MPF Schemes in Hong Kong“ in our June newsletter (2013 issue 3), Hong Kong and the United States announced on June 13, 2013. On November 1, 2014, an intergovernmental Model 2 agreement („IGA“) was formally signed, which will facilitate compliance with the U.S.
Account Compliance Act („FATCA“) and cover fatca compliance exceptions by Hong Kong financial institutions. China is one of many other jurisdictions that have an unsigned „substance agreement“ for a Model 1 IGA with the United States. There are 98,354 FFIs from 97 countries, including 658 from China, who have registered with the United States under their jurisdiction`s Model 1 IGA. FFIs and ETCA must request and obtain these documents in order to respond to FATCA. Directors, managers, partners and agents should understand that their obligations and commitments vary depending on whether their FFI has an FFI agreement with the IRS or is governed by the national rules of a Model 1 IGA jurisdiction. Under the IGA, the Hong Kong FFI must register with the IRS as a participating FFI and sign FFI agreements. FFI agreements require FFIs to obtain the consent of their U.S. customers to disclose their account information to the IRS. If U.S. customers refuse to give their consent, FFI should provide the IRS with „aggregated information“ on account balances, payment amounts and the number of non-consensual U.S.
accounts. The IRS may submit group exchange applications to the Department of Internal Revenue, pursuant to the agreement signed on March 25, 2014 between Hong Kong and the United States. What fatca does he need? An FFI is required to enter into an agreement with the IRS (the „FFI agreement“), i.e. to become a participating FFI („PFFI“) in order to make the following: a total of 23,837 FFIs from 129 countries have entered into FFI agreements directly with the IRS.