The Model 2 Intergovernmental Agreement (“Model 2 IGA”) is an agreement between the U.S. government and a foreign government to facilitate the implementation of FATCA by financial institutions reporting directly to the IRS under the terms of the FFI Agreement.1
Under a Model 2 IGA, a foreign financial institution (FFI) reports information directly to the IRS. In contrast, under a Model 1 IGA, FFIs send information to their local government first, which then forwards it to the IRS.
An FFI in a Model 2 jurisdiction registers for FATCA on the IRS website and obtains a Global Intermediary Identification Number (GIIN). The FFI signs the FFI Agreement, which establishes the FFI’s due diligence, withholding, information reporting, tax return filing, and other obligations as a participating FFI. FFI’s report information to the IRS using Form 8966 (FATCA Report).
Some of the largest Model 2 jurisdictions include Bermuda, Switzerland, and Hong Kong.
The U.S. Department of the Treasury publishes a list of countries that have entered into either the Model 1 IGA or Model 2 IGA. The IRS website provides more information on FATCA.