Media release, 26 November 2012
- Signed agreements with Denmark and Mexico provide New Zealand with a guide to what type of entities and financial products the US will exempt from the application of FATCA.
On 19 November the Governments of the United States of America and Kingdom of Denmark signed an Intergovernmental Agreement (IGA) to implement the Foreign Account Tax Compliance Act (FATCA). Mexico also signed an IGA with the US on the same day. A copy of the Mexican IGA has not yet been released.
The main text of the Danish IGA is largely similar to the IGA signed by the United Kingdom and the US in September and other than some definition changes reflects what NZ is likely to propose to the US in upcoming negotiations.
What will definitely be different in the NZ agreement is the content of Annex II which provides a list of entities and financial products that will not be subject to the onerous customer due diligence and reporting requirements of FATCA.
Having signed IGAs in place provides New Zealand with a guide to what type of entities and financial products the US will exempt from the application of FATCA. This will help the NZ FATCA Joint Working Group compile a wish list for FATCA exemptions to negotiate with the US.
Providers of KiwiSaver and Employer Sponsored Superannuation Schemes will be particularly pleased to see a relatively broad exemption for Danish pension funds and will be looking for a similar exemption for NZ pension products.
If included in the NZ IGA, the definition changes could potentially make FATCA compliance more onerous for financial institutions in NZ than was thought to be the case under the wording in the UK IGA.
More IGAs are expected to be signed before the end of the year which will provide further guidance for NZ during negotiations later this year and in early 2013.