The Agreement between the Kingdom of Spain and the United States of America (hereinafter, the “Agreement”) to improve international tax compliance and  implementation  of  the Foreign Account Tax Compliance  Act  (FATCA), signed in Madrid on May 14, 2013 and in force since December 9, 2013, was published in the Official Journal of Spain (BOE, its Spanish acronym) on July 1.

The aim of this Agreement is to improve foreign account tax compliance control through common reporting and due diligence standards required of financial institutions. It therefore reinforces the fight against international tax evasion and serves as a regulatory framework for financial institutions to comply with FATCA.

The Agreement provides a system for the automatic exchange of information on financial accounts for tax purposes within the scope of mutual assistance between the two countries, and sets out the obligation for financial institutions in each country to:

  • Identiy the accounts held or controlled by persons or entities (citiezns and residents) of the other country, or accounts in which they have any kind of interest.
  • automatically provide annual information on such financial accounts to the other country, pursuant to article 27 of the US Spain Double Taxation Treaty.

With respect to the information that must be provided in such communication, the Agreement provides:

  1. In the case of Spain, with respect to each.. reportable account of each Spanish financial institution subject to the reporting requirement:
  1. The name, address and U.S. Tax Identification Number of any “specified U.S. Person or Entity” that is an account holder of such account, and any non..entities whentheyareidentifiedas“specified.. ersons”;
  2. The account number;
  3. the name and identifying number of the Spanish financial institution required to report the information;
  4. The account balance or value as of the end of the relevant calendar year or other appropriate reporting period;
  5. In the case of a custodial account:
  1. the total gross amount of interest, the total gross amount of dividends, and the total gross amount of other income generated with respect to the assets held in the account, in each case paid or credited to the account (or with respect to the account) during the calendar year or other appropriate reporting period; and
  2. the total gross proceeds from the sale or redemption of property paid or credited to the account during the calendar year or other appropriate reporting period;
  1. in the case of any depository account, the total gross amount of interest paid or credited to the account during the calendar year or other appropriate reporting period; and
  2. in the case of any account not described in the above two subpaagaphs, the total gross amount paid or credited to the Account Holder with respect to the account during the calendar year or other appropriate reporting period with respect to which the Spanish reporting financial institution is the obligor or debtor.
  1. In the case of the U.S., with respect to each Spanish account subject to reporting obligations from each U.S. financial institution subject to reporting obligations:
  1. the name, address, and Spanish Tax Identification Number of any person that is a resident of Spain and is an account holder of the account;
  2. Theaccont number; 
  3. The name and identiying number of the U.S. financial institution required to report the information;
  4. The gross amount of interest paid to a depository account;
  5. The gross amount of U.S. source dividends paid or credited to the account; and
  6. The gross amount of other U.S. source income paid or credited to the account,  to the extent subject to reporting under chapter 3 or 61 of subtitle A of the U.S. Internal Revenue Code.

Concerning the time and manner of the information exchange, the information described above must be obtained and exchanged as follows:

  1. In the case of the U.S. all the information from the calendar year 2013 onwards.
  2. In the case of Spain:
  1. The information to be obtained and exchanged with respect to 2013 and 2014 is only the information described in sub paragaphs i to iv;
  2. The information to be obtained and exchanged with respect to 2015 is the information described in subpaagaphs i to vii, with the exception of the total gross proceeds described in subparagraph v.2.
  3. The information to be obtained and exchanged with respect to 2016 and subsequent years is the information described in subparagraphs i to vii.

Regarding the enforcement of FATCA, the financial institutions subject to the reporting obligation set out in  this  Agreement  will  not be subject to withholding tax on such income under section 1471 of the Internal Revenue Code.

As a final point, on July 2, Ministerial Order HAP/1136/2014 of 30 June, approving the annual reporting statement on financial accounts of certain U.S. persons, form 290, which regulates issues related to the reporting and due diligence obligations set out in the Agreement, has been published in the BOE.