May 14, 2013: Spain FATCA Intergovernmental Agreement
Foreign Account Tax Compliance Act (FATCA)
Spain and the United States sign intergovernmental agreement
On May 14, 2013, Spain and the United States signed an Intergovernmental Agreement (“IGA”) to improve international tax compliance with respect to FATCA. The agreement is substantially similar to the other Model 1 IGAs released to date including reciprocal reporting obligations for the United States. However, minor updates where made to Annex 1 including allowing 90 days for a Reporting Spanish Financial Institution (FI) to document a preexisting account holder that no longer meets a documentation de minimis threshold at the end of a prior calendar year (e.g., account previously excepted from review because the aggregated account balance or value is $50,000 or less but later exceeds $1,000,000 at the end of a calendar year requiring additional due diligence review).
Annex II of the Agreement identifies the Spanish Government (Instituto de Crédito Oficial, Consorcio de Compensación de Seguros, Comisión Nacional del Mercado de Valores), the Central Bank of Spain (Banco de España), and certain Spanish pension funds as exempt beneficial owners. The category of Deemed-Compliant entities under Annex II includes certain small Financial Institutions with Spanish Client Base, and certain Collective investment Vehicles regulated under the laws of Spain. Lastly, Annex II declares certain retirement accounts or products and certain tax-favored accounts or products as exempt products.
This IGA with Spain, the seventh country to date to officially sign an IGA, further bolsters the U.S.’s position to solve the global FATCA compliance problem using IGAs. IGAs are expected to continue to be signed throughout the year, particularly after the recent release of updated Models and Annexes that standardize much of the language and provide an option to enter into an IGA to implement FATCA for countries without a tax information exchange agreement or income tax treaty with the U.S.
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