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US signs FATCA intergovernmental agreements with Chile and Finland

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.

UKsigned September 9 2012

GuernseyDecember 13 2013

Mexico – November 192012

Isle of ManDecember 13 2013

Denmark – November 19 2012

JerseyDecember 13 2013

IrelandJanuary 23 2013

MaltaDecember 16 2013

Norway – April 15 2013

NetherlandsDecember 18 2013

Spain – May 14 2013

Mauritius – December 27 2013

Germany – May 31 2013

Italy – January 10 2014

FranceNovember 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.

SwitzerlandsignedFebruary 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.

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