Does the IGA model change U.S.-source withholding obligations?

No. If you act as a withholding agent, you must still apply Chapter 4 documentation and issue Forms 1042-S/1042 where required. The IGA model mainly affects account reporting, not the base withholding mechanics.

Do Model 2 banks always need explicit client consent for FATCA reporting?

Often yes or they must follow local data export rules. Keep dated evidence of consent or the applicable legal basis. Requirements vary by jurisdiction.

Is due diligence different between Model 1 and Model 2?

Core Chapter 4 standards are similar. However, local IGA annexes can tweak indicia, remediation steps, and timing. Align your KYC/manuals to your local annex.

What GIIN controls should be in place?

Enforce GIIN capture for GIIN-dependent statuses, match monthly to the IRS FFI list, and maintain an exceptions queue with closure evidence.

FATCA: Model 1 vs Model 2 — practical nuances for foreign banks

Most banks operate under a Model 1 IGA (report to local tax authority), some under Model 2 (report directly to the IRS). This guide focuses on operational differences that affect onboarding, GIIN/registration, reporting, client consent, and evidence you should keep for audits and reviews.

Scope: Foreign banks as FFIs/withholding agents. Highlights nuance—not a substitute for legal advice.

1) Quick comparison (what actually changes)

Topic	Model 1 IGA	Model 2 IGA
Registration & GIIN	Register as Reporting Model 1 FFI; GIIN appears on IRS FFI list; report locally.	Register as Reporting Model 2 FFI or Participating FFI; GIIN used for direct IRS reporting.
Reporting flow	Report to local authority per IGA schema; authority exchanges with IRS.	Report directly to IRS (Form 8966 schema). Often additional local notifications exist.
Client consent & data privacy	Local framework governs data transfer; consent wording may be lighter if law compels exchange.	Direct transfer to IRS—banks typically collect explicit consent or follow local export rules; keep evidence.
Due diligence (W-8/W-9/KYC)	Substantively similar Chapter 4 standards; local annexes may tweak indicia/remediation timelines.	Same core standards; ensure your manuals reference the Model 2 nuances (consent, nil reporting, notifications).
Withholding as WA	If you are a withholding agent, U.S.-source FDAP rules still apply (rates, 1042-S/1042). FATCA status affects documentation & pooling but not the base mechanics.	Same. Model type does not relieve WA obligations on U.S.-source payments.
NPFFI exposure	Manage nonparticipating FFIs via documentation controls; block/fallback as policy.	Same, but monitoring is critical since you report directly to IRS.

2) Onboarding & documentation nuances

GIIN-required statuses: For entities claiming a GIIN-dependent status, enforce GIIN capture and monthly matching to the IRS FFI list (see GIIN Tracker).
Consent language (Model 2): Add export/consent text into account T&Cs or W-8 annex; retain dated evidence of acceptance.
Sponsored structures: Capture both sponsor GIIN and sponsored entity details; verify relationship on the FFI list.
Local IGA annex: Map any local definitional tweaks (e.g., indicia remediation) into KYC procedures and training.

3) Reporting practice that passes review

Schema discipline: Keep a data dictionary for Form 8966 (Model 2) or your local IGA schema (Model 1). Version-lock transformations.
Nil returns: Where required, submit nil/zero filings and retain evidence (portal receipts).
TIN/name hygiene: Validate U.S. TIN formats and name standards to lower rejection rates.
Corrections process: Maintain a corrections log with before/after values, impact, and refile receipts.
Evidence pack: Keep a “reporting dossier”: extracts, mapping tables, validations, submission receipts, and error-resolution notes.

4) Withholding interplay (U.S.-source payments)

Regardless of Model 1 or 2, if you are a withholding agent on U.S.-source FDAP, you must apply FATCA/Chapter 4 documentation rules and issue Forms 1042-S/1042 as required. The IGA model mainly affects reporting of account information, not the core withholding mechanics.

Align Chapter 4 status used for pooling/rates with documentation (W-8/W-9 + GIIN where required).
Bridge withholding totals to GL and annual returns (see our 1042-S tie-out guide).
For intermediaries, ensure proper QI/NQI statements and FATCA statuses are on file.

5) Evidence checklist (audit/reviewer-ready)

GIIN master + monthly match logs; exception queue with closures.
Consent records (Model 2) or legal basis notes (Model 1) for data transfer.
Reporting dossier: schema mapping, validations, submission receipts, corrections.
Withholding evidence: W-8/W-9 sets, pooling logic, 1042-S/1042 tie-outs, GL roll-forward.

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