April 15, 2013: Norway FATCA Intergovernmental Agreement
Foreign Account Tax Compliance Act (FATCA)
Norway and the United States sign intergovernmental agreement and memorandum of understanding
On April 15, 2013, Norway and the United States signed an Intergovernmental Agreement (“IGA”) to improve international tax compliance with respect to FATCA. In addition to the IGA, the country entered into a separate memorandum of understanding (“MOU’) to further clarify language in the IGA. The agreement is substantially similar to other Model 1 agreements signed in Europe by the United Kingdom, Ireland, and Denmark and includes reciprocal reporting obligations for the United States. Similar to the Irish, Danish, and Mexican IGAs, the U.S. is committing to creating rules to require the collection and reporting of the Norwegian taxpayer identification number (“TIN”, the Norwegian personal identification number or organization number) for Norwegian residents (along with other information) as opposed to the date of birth for U.K. residents.
The most interesting change to the Norwegian IGA is the addition of two paragraphs in Article 4 that outline how FATCA will apply to foreign financial institutions (FFIs) in Norway. Given the delays in signing the IGA and the timeline changes in the final regulations, a new paragraph six has been added to coordinate the timing of FATCA; essentially coordinating the reporting requirements of Norway with the latest requirements applicable to FFIs under the final regulations. Paragraph six also states that the U.S. does not have to obtain and reciprocate information to Norway until Norway is ready to exchange the reporting information under the agreement. Additionally, because of changes in certain definitions in the final regulations, a new paragraph seven allows Norway to use the new definitions in lieu of the definitions in Article 1 or the annexes; so long as such use does not “frustrate” the purpose of the IGA. The good news for other countries that have already signed an IGA with the U.S. is that the most favored nation clause in those agreements will apply for these latest IGA updates allowing them to benefit from these changes.
The other interesting aspect of this latest IGA release is the MOU released alongside it. Unlike the changes to the substantive terms to the IGA mentioned above, the MOU will not apply to other IGA jurisdictions under the favored nations clause of the IGA and will only apply if the jurisdictions enter into similar understandings. The MOU clarifies four aspects of the Norwegian IGA:
- The financial accounts related to securities registered with the Norwegian Central Securities Depository will be the responsibility of the relevant financial institutions (FIs) holding such securities;
- Article 5 paragraph 1 of the Norwegian IGA gives the Competent Authority in one jurisdiction the ability to directly reach out to FIs in the other jurisdiction for clarifications on reported information if the Competent Authority believes there is a minor or administrative error. However the MOU indicates that if such action would require the FI to provide information to that Competent Authority that it cannot do so under local law, the Competent Authority much reach out to the FI’s local jurisdiction Competent Authority for the information;
- With respect to when the agreement enters into force pursuant to article 10 paragraph 1, the U.S. acknowledges that Norway intends to implement FATCA enabling legislation by September 15, 2015 (with a possible year extension subject to certain assurances) and that the U.S. agrees to treat Norwegian FIs as FATCA compliant during from January 1, 2014 through September 15, 2015 (subject to the year extension); and
- With respect to entities that are exempt as international organizations, clarification that the exemption only applies to international organizations that are intergovernmental organizations, including supranational organizations.
Annex II of the agreement identifies the Norwegian Government, the Central Bank of Norway, certain International Organizations in Norway, and certain Norwegian pension funds as exempt beneficial owners. The category of deemed-compliant entities under Annex II includes certain Non-Profit Organizations, certain Small Financial Institutions with a Norwegian Client Base, and certain Collective Investment Vehicles regulated under the laws of Norway. Lastly, Annex II declares certain retirement accounts or products and certain tax-favored accounts or products as exempt products.
Norway is the sixth country to sign an IGA with the U.S. and further bolsters the U.S.’s position to solve the global FATCA compliance problem using the IGA methodology. Although the signing of IGAs has significantly slowed down after a brief push late last year, this latest signing is hopefully a sign that additional IGAs are ready to be concluded in the near-term.
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