This week, Canada and Hungary became the latest nations to sign agreements pledging tax transparency sought by the Foreign Account Tax Compliance Act (FATCA), bringing the total nations to have signed such agreements to 22. Another 12 nations have committed in substance to agreements to date. In the U.S. Treasury Department’s press release issued yesterday on the matter, Deputy Assistant Secretary for International Tax Affairs Robert B. Stack stated, “The agreements announced today clearly demonstrate the considerable international support behind FATCA and we are proud to lead the global charge on this pressing issue” of combating international tax evasion.
FATCA requires U.S. financial institutions to withhold 30% of certain payments made to foreign financial institutions (“FFI”) unless that FFI agrees to report U.S. taxpayer account information to the IRS. FATCA currently does into effect on July 1, 2014.
Canada has agreed to a Model 1A agreement where FFIs in Canada will report information to the Canada Revenue Agency, which will subsequently exchange information with the IRS pursuant to the present U.S.-Canada tax treaty. This agreement is reciprocal, meaning that the U.S. will also report account information about Canadian individuals and entities in the U.S. to Canada.
Hungary had previously indicated that it reached an agreement with the U.S., but the agreement was only finalized and announced on Tuesday. Hungary signed a reciprocal Model 1A agreement, similar to Canada’s described above.
All FATCA compliance agreements can all be found here.