Treasury previously introduced the “in-substance” intergovernmental agreements (IGA) concept when it announced on April 2, that it would treat jurisdictions that had agreed to enter into a model 1 or 2 IGA, but have not signed it, as having an IGA in effect until December 31. All jurisdictions that had an agreement in place by June 30 would get this benefit. In a later announcement, Treasury announced that it would give the same treatment to jurisdictions which had an agreement in place by November 30.

On December 1, the Treasury Department announced that jurisdictions which have reached an agreement under the Foreign Account Tax Compliance Act (FATCA), but have not signed it by the December 31 deadline, will continue to be treated as having in-substance IGA, under certain conditions. As long as the jurisdiction demonstrates firm resolve to sign the IGA as soon as possible, they will continue to be treated as if the IGA was in place. Treasury stated that after December 31, it will review the list of jurisdictions with in-substance IGAs every month to determine whether the jurisdiction should be removed from the in-substance list. This decision will be based mostly upon the responsiveness of the jurisdiction to communications from the United States.

There are more than 50 jurisdictions which have agreements in place that still need to be signed. This announcement allows those jurisdictions to go through the legislative and administrative processes required to get the IGA signed without losing the protections afforded by the agreement. It also allows for continued FATCA administration without disruption and will avoid inadvertent withholdings by U.S. withholding agents.