The United States, France, Germany, Italy, Spain and the United Kingdom have agreed to explore a common approach to FATCA implementation through domestic reporting and reciprocal automatic exchange based on existing bilateral tax treaties. It is envisioned that the United States and a FATCA partner country would enter into an agreement pursuant to which the FATCA partner would agree to pursue implementing legislation to require foreign financial institutions in its jurisdiction to collect and report to the authorities of the FATCA partner the required information; enable FFIs established in the FATCA partner to diligently identify US accounts; and automatically transfer to the United States the information reported by the FFIs.
In return, the United States would agree to eliminate the obligation of each FFI established in the FATCA partner to enter into a separate comprehensive agreement directly with the IRS, provided that each FFI is registered with the IRS or is excepted from registration pursuant to the agreement or IRS guidance. The US would also allow FFIs established in the FATCA partner to comply with their reporting obligations under FATCA by reporting information to the FATCA partner rather than reporting it directly to the IRS and eliminate U.S. withholding under FATCA on payments to FFIs established in the FATCA partner by identifying all FFIs in the FATCA partner as participating FFIs or deemed-compliant FFIs, as appropriate.
The US would also identify in the agreement specific categories of FFIs established in the FATCA partner that would be treated, consistent with IRS guidelines, as deemed compliant or presenting a low risk of tax evasion. The US would also commit to reciprocity with respect to collecting and reporting on an automatic basis to the authorities of the FATCA partner information on the U.S. accounts of residents of the FATCA partner.
In addition, as a result of the agreement with the FATCA partner, FFIs established in the FATCA partner would not be required to terminate the account of a recalcitrant account holder; impose passthru payment withholding on payments to recalcitrant account holders;impose passthru payment withholding on payments to other FFIs organized in the FATCA treaty partner or in another jurisdiction with which the United States has a FATCA implementation agreement.
More broadly, the US, France, Germany, Italy, Spain and the United Kingdom would commit to develop an effective alternative approach to achieve the policy objectives of passthru payment withholding that minimizes burden and commit to working with other FATCA partners, the OECD, and the EU, on adapting FATCA in the medium term to a common model for automatic exchange of information, including the development of reporting and due diligence standards.