Tax & Accounting Blog

Germany and U.S. Reach Intergovernmental Agreement for FATCA Implementation

1042-S, 1099, International Reporting & Compliance, ONESOURCE, ONESOURCE Nonresident Alien Taxation, Tax Information Reporting, Trust Tax, W-8 & W-9 Foreign Reporting March 20, 2013

The tax authorities of Germany and the United States have initialed an intergovernmental agreement (IGA), as announced by the German Finance Ministry, that makes possible the implementation of U.S. information reporting and withholding tax provisions commonly known as the Foreign Account Tax Compliance Act (FATCA). The German government announcement states that its agreement is based on the model negotiated by the U.S. with France, Italy, Spain and Great Britain. That is a “Model 1” reciprocal agreement under which financial institutions in Germany will report information on their U.S. customers to the German tax authority which will provide information to the IRS, and the IRS will provide information to the German tax authority about payments of interest and dividends to German customers of U.S. financial institutions.

Germany is one of the countries which in 2012 signed a statement endorsing a bilateral intergovernmental approach to FATCA implementation to overcome legal impediments in foreign countries and reduce burdens for foreign financial institutions. The United Kingdom and Spain, two other signatories to that statement, have already concluded FATCA IGAs with the U.S.

In addition, IGAs have been signed with Denmark, Mexico, Ireland and Switzerland. Japan signed a statement endorsing a framework for intergovernmental cooperation to facilitate FATCA implementation, and France and Italy were signatories to the 2012 endorsement of domestic collection of FATCA information and bilateral exchange of information between tax authorities of the U.S. and foreign countries. Thus the FATCA IGA structure continues to expand, though more slowly than originally projected by the U.S. Department of the Treasury.