An intergovernmental agreement* (IGA) provides for a partnership agreement between the US and a FATCA partnership jurisdiction, such as South Africa, as well as other countries such as France, Germany, the United Kingdom, India, and Spain.
An IGA enables countries to build FATCA compliance into their legal framework so that they can implement FATCA. IGAs also enable foreign financial institutions* (FFIs) in the designated jurisdictions to comply with FATCA, especially where there are privacy laws. There are currently two types of IGAs, Model 1 and Model 2.
A Model 1 agreement allows FFIs in a country to report to their local tax authority who will then provide the information to the US Internal Revenue Service (IRS) through the automatic exchange of the information. Each country's tax authority has a separate Model I agreement with the IRS, which includes country-specific provisions in addition to simplified due diligence and withholding requirements.
Under a Model 2 agreement, the FFI would report information directly to the IRS. South Africa has signed a Model 1 agreement with the IRS.
*For any defined terms please see the Table of terms and definitions.
