US signs FATCA intergovernmental agreements with Chile and Finland

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.

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

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.