20 countries gain FATCA agreements

On Wednesday, the US government agreed to treat 20 countries which have reached intergovernmental agreements “in substance” as completed for purposes of the Foreign Accounts Tax Compliance Act (FATCA).

The 20 countries are: Australia, Belgium, Brazil, British Virgin Islands, Czech Republic, Gibraltar, Jamaica, Kosovo, Latvia, Liechtenstein, Lithuania, New Zealand, Poland, Portugal, Qatar, Slovenia, South Africa, South Korea, Romania and Austria.

All countries negotiated a “Model I” type agreement – meaning foreign citizens of those countries with US accounts will report FATCA information to their local authorities – except Austria, which has a “Model II” agreement, meaning Austrian GPs may need to enter into a direct reporting relationship with US tax authority the Internal Revenue Service (IRS).

The agreements will come as a relief to foreign financial firms based in those countries. FATCA goes into effect this July, and many non-US GPs reached a roadblock in their FATCA compliance action plans because it was unclear what type reporting agreement their local government would sign with the US. See related coverage to the right for further details.

Firms operating in violation of FATCA, passed in 2010 to clamp down on tax avoidance, face a punitive 30 percent withholding tax on certain income travelling outside the US.

Despite the additional 20 FATCA agreements in effect, some major private equity activity centers still have yet to sign FATCA papers with the US. G20 countries without a FATCA intergovernmental agreement are: Argentina, China, South Korea, India, Indonesia, Russia, Turkey and Saudi Arabia.