Bulgaria Concludes US FATCA Deal
Bulgaria has formally signed up to the US’s Foreign Account Tax Compliance Act (FATCA), just over six months after the two countries concluded a transitional “in substance” agreement.
FATCA, which was enacted by the US Congress in 2010 and took effect on July 1, 2014, is intended to ensure that the US Internal Revenue Service (IRS) obtains information on financial accounts held at foreign financial institutions (FFIs) by US persons. Failure by an FFI to disclose information on their US clients will result in a requirement to withhold 30 percent tax on payments of US-sourced income.
The US and Bulgaria reached an “in substance” agreement in April, under which the US temporarily regarded Bulgaria as complying with the FATCA provisions, pending the completion of final preparations in Bulgaria.
Countries that entered “in substance” agreements with the USA before July 1, 2014, were given until the end of December to sign a formal intergovernmental agreement (IGA). However, this deadline was recently extended for jurisdictions that show a firm resolve to sign an IGA as soon as possible.
The US Treasury has developed two alternative model IGAs, and Bulgaria’s agreement follows Model 1, under which Bulgarian institutions will report information on US taxpayers to a central authority, which will then relay the information to the Internal Revenue Service.
