On 2 December 2014, the US and Cyprus governments signed an
intergovernmental agreement (IGA) to implement the
Foreign Account Tax Compliance Act (FATCA). There
are two types of IGAs known as "Model 1" and "Model
2". The difference in general terms between the two types of
IGA is that a Model 1 IGA requires foreign financial institutions
(FFIs, referred to simply as foreign institutions
or FIs in the IGA itself) to report the required
FATCA-related information to their own local competent authority
which will report onwards to the US IRS whereas a Model 2 IGA
requires the FFIs to report such information directly to the
IRS.
Cyprus has signed the Model 1 IGA containing a most favoured
nation provision which provides that any more favourable terms
negotiated under another country's IGA will automatically be
applicable to Cyprus. In addition, the IGA is reciprocal and
provides for the IRS to provide Cyprus with information on the US
accounts of Cyprus residents
