On April 15, Norway became the sixth country to sign a Foreign Account Tax Compliant Act (FATCA) intergovernmental agreement (IGA) with the United States. Three days prior, Spain’s Council of Ministers authorized Spain to sign a similar IGA with the United States. FATCA represents the United States’ efforts to “improve tax compliance involving foreign financial assets and offshore accounts.”1
Provisions Unique to the United States-Norway IGA
Unlike the IGAs the United States has entered into individually with the United Kingdom, Denmark, Ireland, Mexico (all of which are based on the Model I template) and Switzerland (based on the Model II template), the Model I IGA with Norway is the first to contain the new "Coordination of Timing" rule in Article 4. This rule, found in Paragraph 6 of Art. 4, provides that Norway isn’t obligated to get and exchange information until the United States is able to obtain and exchange similar information. Similarly, the United States isn’t obligated to get and exchange information until the date that Norway is so obligated.
Article 4 also contains a new “Coordination of Definitions with U.S. Treasury Regulations”—a rule not included in any of the other IGAs to which the United States is a signatory. This rule permits Norway and its financial institutions to use definitions in relevant U.S. Treasury regulations, rather than use corresponding definitions in the IGA—so long as using such definitions won’t frustrate the purposes of the IGA.
Deemed-Compliant Financial Institutions
Section II of Annex II of the IGA with Norway lists the following as deemed-compliant foreign financial institutions: small financial institutions with a local client base; certain collective investment vehicles; and certain non-profit organizations. Certain retirement accounts or products, or certain other tax favorable accounts or products, such as “property savings accounts for young people,” aren’t treated as “financial accounts” and therefore are exempt from reporting.
Spain Positions Itself to Sign
The United States-Spain IGA will be based on the Model I template. It will mandate Spanish financial institutions to report to Spain’s tax authority information about U.S. account holders. This information will be subject to automatic exchange.
1. See Foreign Account Tax Compliant Act (FATCA), http://www.irs.gov/Businesses/Corporations/Foreign-Account-Tax-Compliance-Act-%28FATCA%29.