IGA entered into with Denmark and Mexico
The U.S. Department of the Treasury announced that it has signed a bilateral agreement with the governments of Denmark and of Mexico to implement the information reporting and withholding tax provisions under Chapter 4 of the Internal Revenue Code, commonly known as the Foreign Account Tax Compliance Act (FATCA). The bilateral agreements, each signed on November 19, 2012 are based on the Model I Reciprocal Version of the intergovernmental agreement (IGA) published in July 2012. Unique points to each IGA are provided below.
- Memorandum of Understanding (MOU): An MOU was signed in conjunction with the IGA clarifying that securities registered in a Danish Central Securities Depository that are held by or through one or more other FIs, the relevant financial accounts will be treated as held by the other FIs and such other FIs will be responsible for any reporting required with respect to such Financial Accounts. Notwithstanding the foregoing, a DCSD may report on behalf of such other FIs.
- Annex II:
- Exempt Beneficial Owners include the Danish government, subdivisions, agencies, the Central Bank and pension funds that meet Limitations of Benefits Article 22 of the Treaty Protocol.
- Deemed Compliant Financial Institutions – Small FIs with local client base and meeting 10 requirements similar to the regulations, certain collective investment vehicles, nonprofit organizations and housing cooperatives
- Exempt Products (not financial accounts): Certain retirement accounts or products covered under the Danish Pension Tax Act and various other tax-favored accounts or products that meet the stated regulations.
- Article 2, Paragraph 2 (4) requires the average monthly account balance or value during the relevant calendar year or other appropriate reporting period to be reported. For closed accounts, the reporting requirement is the average monthly balance for the calendar year up to the time of closure. This reporting differs from the Model I which does not consider an average. Furthermore, there is not a definition of what is to be computed and reported as average monthly account balance or value.
- Article 4, Paragraph 1 (d) includes Model I language for Mexican Qualified Intermediaries (QIs). Interestingly, Mexico has never become a qualified jurisdiction for QI, so this requirement does not apply at this time.
- Annex II:
- Exempt Beneficial Owners include the Mexican government, subdivisions, agencies including government affiliated financial entities, the Central Bank and pension funds that are insurance institutions for pensions and life annuities
- Deemed Compliant Financial Institutions – exempt organizations resident in Mexico meeting treaty requirements; certain trusts, collective investment vehicles whose participants are FIs that are not NPFFIs
- Exempt Products (not financial accounts): Personal retirement plans established under social security laws, insurance contracts for retirement meeting Mexican income tax law, pension funds – including voluntary and complimentary savings that do not exceed $50,000 in any year.
For your reference
The US-Denmark IGA can be accessed by clicking this link: FATCA-Agreement-Denmark-11-19-2012 (PDF, 164 KB)
The US-Mexico IGA can be access by clicking this link: FATCA-Agreement-Mexico-11-19-2012 (PDF, 361 KB)
For further information, please do not hesitate to contact us.
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