Cook Islands and U.S. tax agreements

What the U.S. lists show

The IRS A to Z list does not include Cook Islands among the jurisdictions for which it provides links to U.S. income tax treaties.^[3]

The Treasury FATCA agreements table also has no Cook Islands entry. The table organizes FATCA agreements and understandings by jurisdiction.^[2]

The Cook Islands Ministry of Finance and Economic Management lists two international tax agreements: one with New Zealand covering certain income of individuals and a mutual agreement procedure, and one with Australia covering similar matters. Neither is a U.S. income tax treaty or a U.S. FATCA intergovernmental agreement.^[1]

The Cook Islands has also signed a series of Tax Information Exchange Agreements (TIEAs). TIEAs are distinct from income tax treaties and FATCA intergovernmental agreements.^[1]

What a tax treaty means

The IRS describes income tax treaties as agreements that can set reduced rates or exemptions for certain income items, depending on the country and income involved. For foreign country residents, the IRS describes possible U.S. tax reductions on certain U.S. source income. For U.S. residents or citizens, it describes possible reductions in foreign tax on certain income from foreign sources.^[3]

Treaty effects depend on whether the treaty covers a particular type of income. The IRS says that if no treaty exists between the United States and the relevant country, or if a treaty does not cover the income, the income is taxed under the instructions and rates for the applicable U.S. tax return.^[3]

The IRS also notes that some U.S. states do not honor treaty provisions, and state income tax treatment may depend on where income is sourced.^[3]

What a FATCA intergovernmental agreement means

Treasury describes FATCA as requiring foreign financial institutions to report information to the IRS about accounts held by U.S. taxpayers, or by foreign entities in which U.S. taxpayers have a substantial ownership interest. Institutions may register directly with the IRS under FATCA rules or comply with an IGA treated as in effect in their jurisdiction.^[2]

In that context, an intergovernmental agreement is a framework tied to FATCA compliance by financial institutions in a jurisdiction. Treasury's table records jurisdiction, agreement status, agreement model, related arrangements or understandings, and the date the jurisdiction is treated as having an IGA in effect. Cook Islands is not listed in the table.^[2]

Treasury also provides model intergovernmental agreements and related statements. Its table is therefore a jurisdictional listing of FATCA agreements and understandings, not a list of income tax treaties.^[2]

Foreign trust reporting context

The IRS identifies a U.S. person as including a U.S. citizen or resident. U.S. persons who create a foreign trust or transact with one can face U.S. income tax consequences and information reporting requirements.

The IRS says Form 3520 is generally required when a U.S. person creates or transfers money or property to a foreign trust, makes a loan to one, receives a distribution or certain other benefits, or is treated as its U.S. owner. It also identifies certain gifts or bequests from foreign persons as reportable circumstances.^[4]

The IRS describes Form 3520-A as the annual information return for a foreign trust with a U.S. owner. When a U.S. person is treated as the owner under grantor trust rules, the IRS says the foreign trust must file the form and furnish annual statements to U.S. owners and beneficiaries.^[4]

The IRS says an owner generally reports the income of a foreign trust when treated as its owner under the grantor trust rules. A U.S. beneficiary receiving a distribution from a foreign nongrantor trust generally reports the beneficiary's share of distributable net income, with the tax treatment informed by the relevant beneficiary statement.^[4]

Related reading

Cook Islands reporting and U.S. trust forms covers Cook Islands information exchange and the U.S. forms that apply to trusts. Cook Islands trust tax and reporting rules addresses trust taxation and reporting. Cook Islands Trust Legislation covers the jurisdiction's trust legislation, while Cook Islands trusts and U.S. reporting rules provides a broader guide to Cook Islands trusts and U.S. reporting.

Questions and answers

Related resources

Related glossary terms

• Treaty rate table: A treaty rate table summarizes income categories and tax rates or exemptions under U.S. income tax treaties. The IRS explains the tables' scope and limits.
• FATCA: FATCA requires certain U.S. taxpayers to report foreign assets and financial institutions to report accounts to the IRS. Form 8938 may apply at thresholds.
• Foreign entity: Form 8938 instructions treat interests in foreign corporations and partnerships, and in trusts and estates, as specified foreign financial assets in some cases.

Related articles and guides

• Belize and U.S. tax treaty and FATCA lists: Belize appears on neither the IRS treaty list nor the Treasury FATCA table. A treaty and a FATCA agreement are different instruments for U.S. citizens.
• Isle of Man treaty and FATCA position: The IRS treaty list does not include the Isle of Man, while Treasury lists it as In Force under FATCA Model 1. The two lists cover different subjects.

Tools and official documents

• FATCA agreement lookup: Look up any jurisdiction in the U.S. Treasury FATCA table and see its agreement model and status as the Treasury lists them, with a link to the source.

Related pages

• Cook Islands: overview: Start page for this jurisdiction.
• Trustee regulation and licensing
• Taxation of trusts
• Reporting and information exchange
• Courts and legal system