Finland and Chile became the latest nations to sign agreements pledging tax transparency sought by the Foreign Account Tax Compliance Act (FATCA), bringing the total of such intergovernmental agreements to 24. According to Law360, an agreement with Luxembourg will be announced soon, once a French translation of the agreement can be validated. (Drew Singer, Chile, Finland Sign FATCA Agreements, Luxembourg Next,Law360 (March 7, 2014)). Luxembourg has announced that its anticipated FATCA agreement will be a Model 1 agreement.
FATCA requires U.S. financial institutions to withhold 30% of certain payments made to foreign financial institutions (“FFI”) unless that FFI agrees to report U.S. taxpayer account information to the IRS. FATCA currently goes into effect on July 1, 2014.
Finland has agreed to a Model 1A agreement where FFIs in Finland will report information to the Finnish Ministry of Finance, which will subsequently exchange information with the IRS. This agreement is reciprocal, meaning that the U.S. will also report account information about Finnish individuals and entities in the U.S. to Finland.
Chile has agreed to a Model 2 agreement where FFIs in Chile will report information about consenting U.S. accounts directly to the IRS. Information on non-consenting U.S. accounts can be reported government-to-government through a treaty request.
All FATCA intergovernmental agreements can be found here.