March has started well in the Treasury Department’s ongoing efforts to implement FATCA. The Treasury Department inked two more FATCA intergovernmental agreements (IGA’s) on March 5, 2014. Importantly, Chile has signed an IGA, the first country in South America.
The Finnish IGA agreement is based on the Model 1A treaty and requires Finnish financial institutions to report US account holders to their domestic government, which in turn will report those accounts to the US. Similarly, US financial institutions are required to report their foreign account holders to the US, and the US will report those accounts to the Republic of Finland. The Chilean IGA is based on the Model 2 treaty and requires that each Chilean financial institution report their US account holders directly to the United States
The IRS has also released the draft of Form 8966, FATCA Report. Form 8966 will be used by foreign financial institutions and US withholding agents to report US account holders to the IRS. The draft of Form 8966 did not include instructions, so the reporting requirements of the Form are not completely clear.
With the publication of Form 8966 and the signed IGA’s with Finland and Chile the implementation of FATCA is steadily moving forward. Of the fifteen largest economies, as measured by GDP, the only countries that have not signed an IGA are China, Brazil, Russia, India, Australia, and South Korea. The Treasury Department is insistent that there will be no more delays in the implementation of FATCA. The only question is whether the banks and US persons living abroad are prepared for it.