IGA Model 1 – Intergovernmental Agreement (Authority-to-IRS)

The Intergovernmental Agreement (IGA) Model 1 is a bilateral treaty-level arrangement between the United States and a partner country that embeds FATCA obligations into the domestic law of the partner jurisdiction. Under the Model 1 framework, financial institutions in the partner country report data on US accounts to their own national tax authority, which then transmits this information to the US IRS through automatic exchange of information.

Model 1 is by far the more common IGA variant and has been adopted by most European states, including Germany, France, and the United Kingdom. The key advantage is that local financial institutions report only to their familiar national authorities, avoiding data protection conflicts inherent in direct transmission to a foreign tax administration.

IGA Model 1 has two sub-types: Model 1A is reciprocal – the United States also commits to transmitting information about accounts of the partner country's residents to its tax authority. However, US reciprocity is limited: the US reports only interest income and dividends, but not account balances or gross proceeds. Model 1B is non-reciprocal and does not provide for a corresponding US information exchange.

The IGA structure was developed after FATCA critics – primarily from Europe – pointed out that direct reporting of client data to the IRS by foreign banks could violate domestic data protection law (e.g., EU Data Protection Directive) and banking secrecy norms. The US Treasury and IRS developed the IGA concept from 2012 onwards together with the G5 countries (France, Germany, the United Kingdom, Italy, and Spain).

The first Model 1 IGA was signed on September 12, 2012 between the United States and the United Kingdom. Germany followed on May 31, 2013. The EU Commission welcomed the IGA model as a basis for a subsequent global standard – the OECD's Common Reporting Standard (CRS) – which was adopted in 2014.

By the end of 2024, over 100 jurisdictions had signed or brought into force a Model 1 IGA. In addition, the US Treasury maintains a list of jurisdictions that are "treated as having an IGA in effect" – countries that have signed but not yet ratified an IGA, yet are temporarily treated as if an IGA were in force. Implementation occurs through national legislation, such as Germany's Financial Accounts Tax Transparency Act (FKAustG) of 2015.

In 2023, the IRS issued Notice 2023-11, granting relief on TIN collection requirements for Model 1 IGA jurisdictions. Notice 2024-78 extended this relief and clarified due diligence requirements.

IGA Model 1 applies to all financial institutions resident and registered in the partner country under local law (so-called Reporting Financial Institutions, RFIs). Certain institutions classified as Non-Reporting Financial Institutions or Deemed Compliant are excluded (e.g., central banks, governmental entities, qualifying retirement funds). These obligations also apply to jurisdictions classified by the US Treasury as "treated as having an IGA in effect."

• Reportable accounts are those held by US persons (natural and legal) as well as accounts held by passive NFFEs with substantial US owners.
• Thresholds: Pre-existing accounts of natural persons with a balance below USD 50,000 (or USD 250,000 for certain insurance contracts) are exempt from the review requirement.
• Geographically, the IGA applies only within the partner country; subsidiaries operating in third countries may be subject to separate FATCA obligations.

Core requirements under IGA Model 1:

• Registration: Reporting financial institutions must register with the IRS and obtain a GIIN (required even under Model 1 IGAs).
• Due Diligence: Identify and document US accounts under the IGA due diligence rules (largely aligned with the FATCA regulations).
• Reporting to National Authority: Annual transmission of prescribed account data (name, TIN, account number, balance, income) to the national tax authority.
• Onward Transmission by Tax Authority: The national authority automatically transmits the data to the IRS under the agreement.
• Reciprocity (Model 1A): The US reports corresponding information about accounts of the partner country's residents to its tax authority. However, US reciprocal reporting is limited to interest income and dividends – account balances and gross proceeds are not included.
• No Direct Withholding Obligation: Unlike non-IGA FFIs, Model 1 institutions are generally not required to withhold 30% themselves; non-compliance is sanctioned by the partner country.

4 corrections:
- First UK IGA date wrong: May 26, 2012 instead of September 12, 2012
- Number of Model 1 IGAs understated: over 80 vs over 100
- Switzerland incorrectly listed as Model 1 IGA country
- Switzerland passage in history misleading
1 update:
- Missing IRS TIN relief notices (2023, 2024)
4 clarifications.
4 notes.