Malta and the USA concluded negotiations with respect to an Intergovernmental Agreement (IGA) in relation to US Foreign Account Tax Compliance Act Regulations (FATCA).
FATCA was enacted in 2010 by the US Congress as part of the Hiring Incentives to Restore Employment (HIRE) Act. FATCA requires non-US financial institutions to report to the US Internal Revenue Service (IRS) information about financial accounts held by US taxpayers, or by non-US entities in which US taxpayers hold a substantial ownership interest.
The IGA has been negotiated on the basis of the latest Model 1 IGA (reciprocal version) issued by the US. The basic purpose of this IGA is to ensure that financial institutions which are resident (or carrying on business) in Malta or the US, will comply with certain prescribed reporting obligations. The IGA will require financial institutions in both Malta and the US to submit the required information to their own tax authorities, which in turn will automatically share such information with the other tax authority. Such shared information will be used by the tax authorities to ensure that the relevant tax laws of the two countries are being complied with.
As a consequence of compliance with the IGA, financial institutions that are resident or operating in Malta and that comply with the terms of the IGA will benefit in that they will not be subject to the FATCA 30 per cent withholding tax on the payments they receive. The IGA is also intended to reduce the administrative burden of complying with the FATCA regulations as well as to provide a mechanism for Malta financial institutions to comply with their obligations without breaching the data protection laws.