US signs FATCA intergovernmental agreements with Chile and Finland

March 12 2014

Chile and Finland have become the 23rd and 24th jurisdictions to sign bilateral intergovernmental agreements (IGA) to implement the Foreign Account Tax Compliance Act (FATCA) as the US moves slowly towards signing more than 50 with jurisdictions around the world.

Finland has signed a Model 1 IGA, meaning it will exchange information annually on a reciprocal basis with the US. To avoid paying a withholding tax of 30%, Finnish financial institutions will be FATCA compliant if they transmit relevant information about payments to their US account holders to the Finnish tax authorities, who will forward this information to the Treasury and Internal Revenue Service.

Chile also signed an IGA on March 5, but of the Model 2 variety, which means, to avoid paying the same withholding tax of 30%, its financial institutions with US account holders will have to register with the American authorities by July 1 this year and enter into an FFI [foreign financial institutions] Agreement to become FATCA compliant. Model 2 IGAs require non-reciprocal exchange of information.

Since the UK became the first to do so on September 9 2012, 20 jurisdictions have signed Model 1 IGAs with the US.

UK – signed September 9 2012	Guernsey – December 13 2013
Mexico – November 19 2012	Isle of Man – December 13 2013
Denmark – November 19 2012	Jersey – December 13 2013
Ireland – January 23 2013	Malta – December 16 2013
Norway – April 15 2013	Netherlands – December 18 2013
Spain – May 14 2013	Mauritius – December 27 2013
Germany – May 31 2013	Italy – January 10 2014
France – November 14 2013	Hungary – February 4 2014
Denmark – November 19 2013	Canada- February 5 2014
Costa Rica – November 26 2013	Finland – March 5 2014
Cayman Islands – November 29 2013

Four jurisdictions have signed Model 2 IGAs since Switzerland became the first one to do so on February 14 last year.

Switzerland – signed February 14 2013	Bermuda- December 19 2013
Japan – June 11 2013	Chile – March 5 2014

Intergovernmental agreements were unveiled in July 2012 as the instrument for implementing FATCA to overcome any local legal restrictions on reporting directly to a foreign jurisdiction, that is, the US, which was the original intention in the legislation. Progress on signing them, however, has been slow. The Treasury announced in November 2012 that it was in IGA negotiations with more than 50 jurisdictions. Sixteen months later it has signed less than half that number.