The IRS has announced the exchange of financial account information with certain foreign tax administrations, meeting an important milestone related to the Foreign Account Tax Compliance Act (FATCA) (P.L. 111-147). In order to accomplish this, the IRS developed the information system infrastructure, procedures and data use and confidentiality safeguards to protect taxpayer data while facilitating reciprocal automatic exchange of tax information with certain foreign jurisdiction tax administrators as specified under the intergovernmental agreements (IGAs) implementing FATCA. This information exchange is part of overall efforts by the IRS to implement FATCA, enacted in 2010 by Congress to target non-compliance by U.S. taxpayers using foreign accounts or foreign entities.
The U.S. government, responding to the enactment of FATCA, as well as the interest of other jurisdictions in facilitating and participating in the exchange of financial account information, entered into a number of bilateral IGAs that provided the groundwork for inter-jurisdictional cooperation. Certain IGAs not only enable the IRS to receive this information from foreign financial institutions, but also enable more efficient exchange by allowing a foreign jurisdiction tax administration to gather the specified information and provide it to the IRS. Some IGAs also require the IRS to reciprocally exchange certain information about accounts maintained by residents of foreign jurisdictions in U.S. financial institutions with their jurisdictions’ tax authorities. Under these reciprocal IGAs, the first exchange had to take place by September 30, 2015, giving the IRS a deadline to put in place a process to facilitate this data exchange. Meeting this deadline reflects a significant international collaboration and partnership with dozens of jurisdictions around the world.