The agreement, signed on Friday, also aims to improve Luxembourg‘s international tax compliance and further its resolve to make the country more transparent for tax purposes.
Friday’s deal comes after negotiating teams from both countries agreed on the terms of the intergovernmental agreement (IGA) model 1, which aims to make it easier for partner countries to comply with FATCA provisions.
For a comparison between the IGA model 1 and 2 click here.
The Luxembourg tax administration has set up two working groups to bring together different factors from the public and private sector in order to implement the automatic exchange of information.
The first working group will focus on general issues relating to the implementation of the agreement, while the second will deal mainly with technical questions regarding the electronic communication of information between reporting financial institutions and the Tax Administration.
Enacted in 2010, the Foreign Account Tax Compliance Act is part of the US Hiring Incentives to Restore Employment Act. It ensures that US persons, wherever they are located and in whatever investment vehicle they hold their assets, are paying the correct amount of US tax.
As reported last week, financial institutions (FIs) have until 25 April to register with the IRS to appear on its first published list of companies which are officially FATCA compliant. The list will be published on 2 June.
Institutions located in countries that have signed an IGA with the US will have to register with the US government, through a website referred to as the “FATCA Portal”, where they will receive a Global Intermediary Identification Number (GIIN).
A GIIN is a unique identifier that FIs will have to supply to other financial institutions with which they maintain accounts or act as payees.
A company's GIIN may be checked online and will certify an institution’s compliance with the FATCA regulations.
Canada signed an agreement to implement FATCA into its tax policy in February.
The agreement differed from the 21 other FATCA agreements that have been signed, as a result of what were described as "significant exemptions and other relief" obtained by Canada's officials in pre-signing negotiations.
A statement on the Canadian Finance Department’s website said registered retirement savings plans, registered retirement income funds, registered disability savings plans and tax-free savings accounts were exempt from FATCA and not reportable.
