COMPETENT AUTHORITY ARRANGEMENTBETWEEN THE COMPETENT AUTHORITIES OF THE UNITED STATES OF AMERICA AND THE REPUBLIC OF SERBIA("Off. Herald of RS - Treaties", No. 5/2020) |
On April 10, 2019, at Belgrade, the Government of the United States of America and the Government of the Republic of Serbia signed an intergovernmental agreement ("IGA") entitled, "Agreement between the Government of the United States of America and the Government of the Republic of Serbia to Improve International Tax Compliance and to Implement FATCA." The IGA requires, in particular, the exchange of certain information with respect to U.S. Reportable Accounts on an automatic basis.
Article 3(6) of the IGA provides that the Competent Authorities of the United States and Serbia (the "Competent Authorities") "shall enter into an agreement or arrangement under the mutual agreement procedure provided for in Article 8" of the IGA, in order to establish and prescribe the rules and procedures necessary to implement certain provisions in the IGA. Article 8 of the IGA permits the Competent Authorities to also address other matters regarding implementation of the IGA. Consistent with the IGA and after consultations between the Competent Authorities, the Competent Authorities have reached the following arrangement ("Arrangement").
Terms used both in this Arrangement and in the IGA have the same meaning as in the IGA, unless otherwise specified in this Arrangement. References to Paragraphs pertain to Paragraphs of this Arrangement, unless otherwise specified. Except as otherwise provided in the IGA, any references to U.S. Treasury Regulations are to the relevant regulations in effect at the time of application. References to Internal Revenue Service ("IRS") Publications include updated versions. All references to days comprising time periods for completion of actions refer to calendar days and not business days. However, if such period ends on a Saturday, Sunday or national statutory holiday, it would be treated as ending on the next calendar day that is not a Saturday, Sunday or national statutory holiday.
Paragraph 1
1.2 As provided in Article 3(6) of the IGA, this Arrangement establishes the procedures for the automatic exchange obligations described in Article 2 of the IGA and for the exchange of information reported under Article 4(1)(b) of the IGA. Information to be exchanged pursuant to Articles 2 and 4(1)(b) of the IGA includes information provided:
1.1.1 by a Reporting Serbian Financial Institution,
1.1.2 by or on behalf of each of the following Non-Reporting Serbian Financial Institutions that would be treated as a deemed-compliant FFI under Annex II of the IGA for purposes of section 1471 of the U.S. Internal Revenue Code (a "Paragraph 1.1.2 Financial Institution"):
- a Financial Institution with a Local Client Base, as described in Section III(A) of Annex II of the IGA;
- a Trustee-Documented Trust, as described in Section IV(A) of Annex II of the IGA;
- a Sponsored Investment Entity, as described in Section IV(B)(1) of Annex II of the IGA;
- a Sponsored Controlled Foreign Corporation, as described in Section IV(B)(2) of Annex II of the IGA;
- a Sponsored, Closely Held Investment Vehicle, as described in Section IV(C) of Annex II of the IGA; or
- a Collective Investment Vehicle as described in Section IV(f)(4) of Annex II of the IGA.
1.2 A Serbian Financial Institution that would otherwise qualify as a Paragraph 1.1.2 Financial Institution, and thus as a Non-Reporting Serbian Financial Institution under Article 1(1)(o) of the IGA, but does not satisfy one or more applicable requirements in Annex II or the relevant U.S. Treasury Regulations is a Reporting Serbian Financial Institution under Article 1(1)(n) of the IGA.
1.3 As provided in Article 3(6) of the IGA, this Arrangement prescribes rules and procedures as may be necessary to implement Article 5 of the IGA.
1.4 As permitted by Article 8 of the IGA, this Arrangement addresses other matters concerning implementation of the IGA, including: registration, confidentiality and other protections, costs, consultation and modification, and [publication/non-disclosure] of this Arrangement.
Paragraph 2
Registration of Serbian financial institutions
2.1 In General: The Competent Authorities note that, under Article 4(1)(c) and Annex II of the IGA, a Reporting Serbian Financial Institution or Paragraph 1.1.2 Financial Institution would be treated as compliant with, and not subject to withholding under, section 1471 of the U.S. Internal Revenue Code if the Reporting Serbian Financial Institution or Paragraph 1.1.2 Financial Institution (or, as applicable, its sponsor or trustee), among other requirements, complies with the applicable registration requirements on the FATCA registration website. The Competent Authorities also note the IRS intends to issue a unique Global Intermediary Identification Number ("GIIN") to each Reporting Serbian Financial Institution and Paragraph 1.1.2 Financial Institution that successfully completes the FATCA registration requirements.
2.2 Inclusion of Serbian Financial Institutions on IRS FFI List: The IRS intends to include on the "IRS FFI list" (as defined in section 1.1471-1(b)(73) of the U.S. Treasury Regulations) the name and GIIN of each Serbian Financial Institution issued a GIIN by the FATCA Registration System. Pursuant to Article 5(3)(b) of the IGA and Paragraph 4.3.2.2, however, a registered Serbian Financial Institution would be removed from the IRS FFI list if an issue of significant non-compliance is not resolved within a period of 18 months.
2.3 Exchange of Registration Information: The U.S. Competent Authority intends to provide the Serbian Competent Authority annually with the information necessary to identify each registered Serbian Financial Institution included on the IRS FFI list.
Paragraph 3
Time and manner of exchange of information
3.1 Automatic Exchange within Nine Months: Consistent with Articles 3(5) and 3(6) of the IGA, the Serbian Competent Authority intends to exchange automatically with the U.S. Competent Authority the information described in Articles 2 and 4(1)(b) of the IGA within nine months after the end of the calendar year to which the information relates.
3.2 Format:
3.2.1 Information Described in Articles 2(2) and 4(1)(b) of the IGA: The FATCA XML Schema, as reflected in the FATCA XML Schema User Guide (IRS Publication 5124), and the FATCA Metadata XML Schema, as reflected in the FATCA Metadata XML Schema User Guide (IRS Publication 5188), posted on http://www.irs.gov/FATCA ("IRS.gov") are intended to be used as the format for the exchange of information described in Articles 2(2) and 4(1)(b) of the IGA. The FATCA XML Schema User Guide (IRS Publication 5124) and the FATCA Metadata XML Schema User Guide (IRS Publication 5188) describe the structure of the schemata and include data dictionaries with summaries of the relevant data elements.
3.2.2 Notices: The U.S. Competent Authority intends to use the schemata described in the FATCA XML Schema User Guide (IRS Publication 5124), FATCA Metadata XML Schema User Guide (IRS Publication 5188), and FATCA Reports ICMM Notification XML Schema User Guide (IRS Publication 5216) posted on IRS.gov as the format for providing notices pursuant to this Arrangement.
3.2.3 Schema Changes: The IRS intends to post any changes to the schemata applicable to a particular calendar year on IRS.gov as soon as possible. When feasible, IRS intends to provide notice of such changes prior to posting. The Competent Authorities anticipate a collaborative process concerning schemata changes.
3.3 Information Transmission:
3.3.1 Method: The Competent Authorities intend to use the International Data Exchange Service ("IDES"), as reflected in the FATCA IDES User Guide (IRS Publication 5190) and the FATCA Metadata XML Schema User Guide (IRS Publication 5188) posted on IRS.gov, for all exchange of information, including notices described in Paragraph 4.3, pursuant to the IGA.
3.3.1.1 Use of Regional Router for Transmission: The Serbian Competent Authority may elect to use a regional router (e.g. the European Union’s "Speed 2") to transmit information to, and download information from, IDES where the U.S. Competent Authority has approved that regional router in writing for compliance with specified standards, including encryption and internet transmission protocols. This election should be made in writing and delivered to the U.S. Competent Authority prior to transmitting information via the regional router to IDES or downloading information from IDES via the regional router.
3.3.1.2 Use of IDES as a Data Collection Tool: The Serbian Competent Authority may elect to use IDES as a Model 1 Option 2 ("M1O2") data collection tool for its information exchange pursuant to the IGA. The procedures and methodology for using IDES in this manner are described in greater detail in the FATCA IDES User Guide (IRS Publication 5190). The M1O2 election should be made in writing and delivered to the U.S. Competent Authority prior to the uploading or downloading of information to or from IDES by a Reporting Serbian Financial Institution or by or on behalf of a Paragraph 1.1.2 Financial Institution.
3.3.1.3 Consistency: The Competent Authorities intend that an election described in Paragraph 3.3.1.1 or 3.3.1.2 applies consistently to all information uploaded or downloaded from the time of the election, unless such election is properly revoked consistent with Paragraph 3.3.1.4.
3.3.1.4 Revocation of Election: The Serbian Competent Authority may revoke an election described in Paragraph 3.3.1.1 or 3.3.1.2 following consultation with, and written notice to, the U.S. Competent Authority.
3.3.2 When Information is Exchanged: Information described in Articles 2(2) and 4(1)(b) of the IGA would be considered exchanged at the time of receipt specified in Paragraph 3.3.4. See Paragraph 5.2 concerning each Competent Authority’s responsibility for maintaining confidentiality and other protections with respect to exchanged information.
3.3.3 Feedback and Consultation: The Competent Authorities understand that feedback with regard to data quality and usability is an important element of the exchange process and they may consult with each other as provided in Paragraph 7.2 about data error or transmission problems inadequately addressed through standard notification processes over IDES.
3.3.4 Time of Receipt: Except as described below, information transmitted via IDES by the Serbian Competent Authority would be considered provided to, and received by, the U.S. Competent Authority on the date the information is successfully uploaded onto IDES. Except as described below, information transmitted by the U.S. Competent Authority via IDES would be considered provided to, and received by, the Serbian Competent Authority on the date the information is available for downloading from IDES.
3.3.4.1 Regional Router: If the Serbian Competent Authority elects the use of a regional router for information transmission via IDES, information the regional router transmits would be considered provided to, and received by, the U.S. Competent Authority on the date it is successfully uploaded from the router to IDES, and information transmitted by the U.S. Competent Authority would be considered provided to, and received by, the Serbian Competent Authority on the date it is available for downloading to the router from IDES.
3.3.4.2 M1O2 Data Collection Tool: If Serbian Competent Authority elects to use IDES as an M1O2 data collection tool, information would be considered provided to, and received by, the U.S. Competent Authority on the date the Serbian Competent Authority approves and therefore releases the information on IDES to the U.S. Competent Authority, and information transmitted by the U.S. Competent Authority would be considered provided to, and received by, the Serbian Competent Authority on the date it is available for downloading from IDES. See FATCA IDES User Guide (IRS Publication 5190).
3.4 Notification of File Processing Success or Failure:
3.4.1. Notification of File Processing Success: Within 15 days of successfully receiving a file containing the information described in Articles 2(2) and 4(1)(b) of the IGA in the time and manner described in Article 3(5) of the IGA and in Paragraph 3, the U.S. Competent Authority should provide notice of such successful receipt to the Serbian Competent Authority. The U.S. Competent Authority expects to generate such notification automatically through the International Compliance Management Model ("ICMM") and transmit it via IDES. The notice need not express the U.S. Competent Authority’s view about the adequacy of the information received or whether the U.S. Competent Authority believes that the Serbian Competent Authority should take measures pursuant to Article 5 of the IGA to obtain corrected or complete information.
3.4.2. Notification of File Processing Failure: Within 15 days of receiving a file containing information that cannot be processed, the U.S. Competent Authority should provide notice of such processing failure to the Serbian Competent Authority. The U.S. Competent Authority expects to generate such notification automatically through the ICMM and transmit it via IDES.
3.4.3 ICMM: A description of, and additional information regarding, ICMM, including the (i) FATCA Reports ICMM Notifications User Guide (IRS Publication 5189), and (ii) FATCA Reports ICMM Notification XML Schema User Guide (IRS Publication 5216), can be found on IRS.gov.
3.5 Transliteration: Any information the Serbian Competent Authority exchanges that is reported in a non-Latin domestic alphabet or literation is expected to be transliterated pursuant to Serbian domestic procedures or rules aligned with international standards for transliteration (for example as specified in ISO 8859) into the Latin alphabet. The Serbian Competent Authority may send designatory data (e.g., name or address) both in its domestic alphabet or literation and separately in the Latin alphabet within each account record if it so chooses. The Serbian Competent Authority should also be prepared to transliterate the information it receives from the U.S. Competent Authority from the Latin alphabet to any non-Latin domestic alphabet or literation it uses or accepts.
Paragraph 4
4.1 In General: The Serbian Competent Authority should seek to ensure that all of the information specified in Articles 2(2) and 4(1)(b) of the IGA has been identified and reported by Reporting Serbian Financial Institutions and by or on behalf of Paragraph 1.1.2 Financial Institutions to the Serbian Competent Authority, so that such information is available to be exchanged with the U.S. Competent Authority in the time and manner described in Article 3(5) of the IGA and in Paragraph 3.
4.2 Categories of Non-Compliance: Non-compliance with the IGA may be administrative or minor in nature, or may constitute significant non-compliance.
4.2.1 Significant Non-Compliance: Under Article 5(3) of the IGA, the U.S. Competent Authority has the discretion to determine whether there is significant non-compliance with the obligations to obtain and exchange information described in Articles 2(2) and 4(1)(b) of the IGA with respect to a Reporting Serbian Financial Institution. The U.S. Competent Authority also has the discretion to determine significant non-compliance based on failure to satisfy due diligence, reporting, withholding and other obligations with respect to a Reporting Serbian Financial Institution. The U.S. Competent Authority may determine that certain failures constitute significant non-compliance with respect to a Reporting Serbian Financial Institution regardless of whether the failure is attributable to the Serbian Competent Authority or the Reporting Serbian Financial Institution. Examples of significant non-compliance are set forth in Paragraphs 4.2.1.1 through 4.2.1.3.
4.2.1.1 Reporting Failures: The U.S. Competent Authority may find significant non-compliance based on a failure by a Reporting Serbian Financial Institution to report information on U.S. Reportable Accounts, as specified in Article 4(1)(a) of the IGA, or on 2015 and 2016 payments to Nonparticipating Financial Institutions, as specified in Article 4(1)(b) of the IGA.
4.2.1.2 Failure to Timely Correct: Failure by a Reporting Serbian Financial Institution to correct administrative or other minor errors may, in the discretion of the U.S. Competent Authority, lead to a determination of significant non-compliance. The Competent Authorities expect, however, that in the ordinary course a determination of such significant non-compliance would not occur until at least 120 days after the notice specified in Paragraph 4.3.1 is provided to, and received by, the Serbian Competent Authority (per Paragraph 3.3.4).
4.2.1.3 Other Non-compliance Under the IGA: The U.S. Competent Authority may make a determination of significant non-compliance with respect to a Reporting Serbian Financial Institution to the extent it does not meet the conditions set forth in Article 4 of the IGA, including by failing to (i) withhold on any U.S. Source Withholdable Payment made to any Nonparticipating Financial Institution to the extent required under Article 4(1)(d) of the IGA; (ii) provide to any immediate payor of a U.S. Source Withholdable Payment the information required for withholding and reporting on any such payment to a Nonparticipating Financial Institution to the extent required under Article 4(1)(e) of the IGA; and (iii) comply with Article 4(5) of the IGA with respect to Related Entities and branches that are Nonparticipating Financial Institutions. Lack of compliance with other conditions set forth in Article 4, such as compliance with applicable registration requirements, may also lead to a determination of significant non-compliance with regard to a Reporting Serbian Financial Institution.
4.2.1.4 Consultation: In the ordinary course, the Competent Authorities anticipate consultation prior to a determination of significant non-compliance.
4.2.2 Administrative or Other Minor Errors: Under Article 5(2) of the IGA, administrative and other minor errors include incorrect or incomplete reporting of information described under Articles 2(2) and 4(1)(b) of the IGA or other errors that result in infringements of the IGA.
4.2.2.1 Self-initiated Reporting Changes: In the event the Serbian Competent Authority receives a notice from a Reporting Serbian Financial Institution or by or on behalf of a Paragraph 1.1.2 Financial Institution regarding an omission or other error in an exchanged report, the report should be amended. The Serbian Competent Authority should forward any amended reports to the U.S. Competent Authority as soon as practicable.
4.3 Notification Procedures: To address non-compliance, the U.S. Competent Authority would notify the Serbian Competent Authority pursuant to Article 5 of the IGA. The notification procedures would differ depending upon whether the U.S. Competent Authority seeks to address administrative or other minor errors or significant non-compliance.
4.3.1 Procedures for Administrative or Other Minor Errors: As provided in Article 5(2) of the IGA, the U.S. Competent Authority would notify the Serbian Competent Authority when the U.S. Competent Authority has reason to believe that administrative errors or other minor errors may have led to incorrect or incomplete information reporting or result in other infringements of the IGA. The Serbian Competent Authority would then apply its domestic law (including applicable penalties) to obtain complete and correct information or to resolve other minor or administrative infringements of the IGA and exchange such information with the U.S. Competent Authority.
4.3.2 Procedures for Significant Non-Compliance:
4.3.2.1 In General: Under Article 5(3) of the IGA, the U.S. Competent Authority notifies the Serbian Competent Authority when the U.S. Competent Authority has determined there is significant non-compliance with the obligations under the IGA with respect to a Reporting Serbian Financial Institution. After such notification of significant non-compliance from the U.S. Competent Authority, the Serbian Competent Authority would apply its domestic laws (including applicable penalties) to address the significant non-compliance described in the notice. The Competent Authorities may consult on the steps needed to address such non-compliance. If the U.S. Competent Authority were to notify the Serbian Competent Authority of a determination of significant non-compliance, the date on which notification was provided to, and received by, the Serbian Competent Authority (per Paragraph 3.3.4) would constitute the beginning of the 18 month period set forth in Article 5(3)(b) of the IGA.
4.3.2.2 Notice to Reporting Serbian Financial Institution: The Serbian Competent Authority should notify the relevant Reporting Serbian Financial Institution of the significant non-compliance determination, including the date the U.S. Competent Authority provided notice of such non-compliance to the Serbian Competent Authority (per Paragraph 3.3.4). The notice should also indicate that if the significant non-compliance is not cured within 18 months after the date the U.S Competent Authority provided notice to the Serbian Competent Authority, the relevant Reporting Serbian Financial Institution may be treated as a Nonparticipating Financial Institution, its name may be removed from the IRS FFI list, and it may therefore be subject to 30-percent withholding under section 1471(a) of the U.S. Internal Revenue Code.
4.4 Transition Period for Remediation and Enforcement:
4.4.1 The Competent Authorities intend calendar years 2014 and 2015 to be a transition period for purposes of the enforcement and administration of any data collection, due diligence, information reporting, automatic information exchange, and withholding requirements described in the IGA. The U.S. Competent Authority intends to take into account the good faith efforts of the Serbian Competent Authority, Reporting Serbian Financial Institutions, and Paragraph 1.1.2 Financial Institutions toward compliance with any such requirements during this transition period when pursuing enforcement.
4.4.2 The transition period described in Paragraph 4.4.1 may be extended by the U.S. Competent Authority following consultation with the Serbian Competent Authority.
4.5 General Inquiries: Under Article 5(1) of the IGA, the U.S. Competent Authority intends to make follow-up requests described in Article 5(1) of the IGA ("Competent Authority Requests") to the Serbian Competent Authority. In response, the Serbian Competent Authority intends to obtain the requested additional information from Reporting Serbian Financial Institutions with respect to U.S. Reportable Accounts and to provide such additional information to the U.S. Competent Authority.
4.5.1 Competent Authority: Exchange of information concerning Competent Authority Requests is expected to take place between the Competent Authorities or their authorized representatives. The Competent Authorities intend to provide written notification to each other providing contact information (name, title, and mailing address) for each jurisdiction’s Competent Authority for purposes of the IGA, and to update this contact information, as appropriate.
4.5.2 Content of Requests: A Competent Authority Request should generally contain sufficient background information to communicate both the relevance of the request to an examination, investigation, or procedure and the nature of the information being requested. A Competent Authority Request should contain identifying information regarding the individual person or group of persons (typically the name, address, and/or TIN), taxable periods for which information is sought, a detailed description of the specific information requested, e.g., account opening documents, signature cards, account statements, copies of canceled checks, deposit slips, wire transfers, and the name and GIIN of the Reporting Serbian Financial Institution believed to be in the possession of the requested information. For examples of additional information that may be included in a Competent Authority Request, see Appendix 2 of the Global Forum on Transparency and Exchange of Information for Tax Purposes Exchange of Information Working Manual ("EOI Working Manual"), currently found at http://www.oecd.org/tax/transparency/EOI%20manual.pdf, and equivalent successor publications.
4.5.3 Procedures for Requests: The Serbian Competent Authority should confirm receipt of a Competent Authority Request within ten days of receipt. The Serbian Competent Authority should take all relevant information-gathering measures allowed under its domestic laws to provide the U.S. Competent Authority with the information requested, notwithstanding that the Serbian may not need such information for its own tax purposes. In the event the Competent Authority Request seeks authentication of copies of original records, such as a certificate of authenticity executed by the record keeper, the Serbian should obtain and exchange such authenticated copies to the extent permitted under its law or administrative practice.
4.5.4 Timeframe to Respond: The U.S. Competent Authority expects that the Serbian Competent Authority provide the requested additional information to the U.S. Competent Authority within 90 days after a Competent Authority Request is received by the Serbian Competent Authority.
4.5.5 Inability to Respond: In the event that the Serbian Competent Authority is unable to provide the requested information in response to a Competent Authority Request, it should promptly inform the U.S. Competent Authority and explain the reasons for its inability to provide the requested information. In the event that the Serbian Competent Authority can only partially respond to a Competent Authority Request within the timeframe described in Paragraph 4.5.4, it should provide a partial response, to the extent possible, and an update on the status of the response.
Paragraph 5
5.1 Confidentiality and Use: In accordance with Article 3(7) of the IGA, all information exchanged pursuant to the IGA is subject to the confidentiality and other protections provided for in Article 9 of the IGA ("Confidentiality Protections"), including the provisions limiting the use of the information exchanged. The Competent Authorities intend to implement or continue to practice, as applicable, administrative policies and practices to protect the confidentiality of information exchanged, consistent with the 2012 Joint OECD/Global Forum Keeping it Safe Guide, currently found at http://www.oecd.org/tax/transparency/final%20Keeping%20it%20Safe%20with%20cover.pdf.
5.2 Transmission Risk and Responsibility for Information Transmitted via IDES: The U.S. Competent Authority intends to maintain Confidentiality Protections regarding information transmitted via IDES from the time information is successfully uploaded to IDES by the Serbian Competent Authority. Where the Serbian Competent Authority elects to use IDES as an M1O2 data collection tool, the Serbian Competent Authority intends to maintain Confidentiality Protections from the time information is successfully uploaded by a Reporting Serbian Financial Institution or by or on behalf of a Paragraph 1.1.2 Financial Institution to IDES. See FATCA IDES User Guide (IRS Publication 5190). The Serbian Competent Authority intends to maintain Confidentiality Protections regarding information transmitted by the U.S. Competent Authority via IDES from the time it successfully downloads such information from IDES.
5.3 Notification of Actual or Potential Breach of the Confidentiality and Safeguard Protections: A Competent Authority should notify the other Competent Authority promptly regarding any actual or potential breach of the Confidentiality Protections.
Paragraph 6
6.1 Each Competent Authority intends to bear its own costs incurred in administering the IGA and this Arrangement. The Serbian Competent Authority intends to bear its own costs in enforcing its domestic laws and providing assistance under this Arrangement. The Competent Authorities may consult with each other in advance of incurring extraordinary costs to consider whether, and if so how, to allocate such costs between the Competent Authorities.
Paragraph 7
Effect, consultation and modification
7.1 Operative Date: This Arrangement becomes operative on the later of (i) the date the IGA enters into force, or (ii) the date the Arrangement is signed by the U.S. and Serbian Competent Authorities. Once the Arrangement is operative, its provisions apply to all information that is exchanged pursuant to the IGA, including information for calendar years that precede the operative date.
7.2 Consultation: Each Competent Authority may at any time request consultations on the implementation, interpretation, application, or modification of this Arrangement. Such consultation (through discussion or correspondence) should take place within a period of 30 days from the date of receipt of such request, unless otherwise mutually decided. If the Competent Authority of a Party believes the other Party has failed to fulfill its obligations under the IGA, it may request immediate consultation to ensure fulfillment of the IGA.
7.3 Modification: This Arrangement may be modified at any time by mutual consent of the Competent Authorities, in writing.
7.4 Discontinuation: This Arrangement is intended to be discontinued automatically upon termination of the IGA. In the event of discontinuation, all information previously received under this Arrangement would remain subject to the Confidentiality Protections.
Paragraph 8
8.1 The Competent Authorities intend to make this Arrangement publicly available through official publication by each Party within 30 days from the last date of signature of this Arrangement. The Competent Authorities expect to set the precise date and time through consultation.
For the United States Competent |
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For the Serbian Competent |