FATCA Update: Brazil Signs IGA with U.S. and Treasury Releases More Guidance

Treasury logoOn September 24, 2014, the government of Brazil announced it had signed an intergovernmental agreement with the United States as part of its adoption of the requirements of the Foreign Account Tax Compliance Act (FATCA). The agreement was signed on September 23 by Finance Minister Guido Mantega and U.S. Ambassador Liliana Ayalde. The Brazil-U.S. IGA is reciprocal, meaning that information on U.S. taxpayers residing in Brazil will be sent by Brazilian financial institutions to Brazil’s federal tax department, which will then pass on the information to the U.S. Internal Revenue Service, and the IRS will provide Brazilian tax authorities with financial information on Brazilian taxpayers living in the U.S. This brings the total number of IGAs reached – either signed agreements or in substance – to over 100. (A list of all IGAs is available on Treasury’s website here.)

In related developments, the IRS updated its FATCA FAQs to address whether a nonreporting FFI under a Model 1 IGA is required to register and obtain a GIIN, and under what circumstances FFIs in IGA countries may use substitute Forms W-8. (The updated FAQs are available on the IRS website here.)

Finally, the IRS is updating Form 1099 to address FATCA reporting.  Newly issued Form 1099 instructions provide as follows:  “Beginning in 2014, an FFI with a chapter 4 requirement to report a U.S. account maintained by the FFI that is held by a specified U.S. person may satisfy this requirement by reporting on Form(s)1099 under the election described in Regulations section 1.1471-4(d)(5)(i) (A). Additionally, a U.S. payor may satisfy its chapter 4 requirement to report such a U.S. account by reporting on Form(s) 1099. See Regulations section 1.1471-4(d)(2)(iii)(A). Form 1099-MISC is among the Forms 1099 used for such purpose. A new check box was added to Form 1099-MISC to identify an FFI filing this form to satisfy its chapter 4 reporting requirement.”  (The new instructions can be found here, here, and here.)

FATCA became effective on July 1, 2014.