Mexico, US Sign FATCA Agreement
by Mike Godfrey, Tax-News.com, Washington
23 November 2012
On November 19, 2012, in Washington, the Mexican Undersecretary of Revenue, José Antonio González Anaya, and the United States Assistant Secretary for Tax Policy, Mark J. Mazur, signed a government-to-government agreement for the bilateral implementation of the Foreign Account Tax Compliance Act (FATCA).
FATCA was enacted by Congress in March 2010 and is intended to ensure that the US tax authorities obtain information on financial accounts held by US taxpayers with foreign financial institutions (FFIs). Failure by an FFI to disclose information would result in a requirement to withhold 30% tax on US-source income.
FFIs across the world have all expressed concern about the legislation, particularly the changes to their systems it will entail, and the penalties that will ensue in case of non-compliance. Those concerns led the US Treasury to pursue government-to-government frameworks for implementing FATCA.
A government-to-government agreement, as signed between the US and Mexico, does not contain any exemption from FATCA, but, instead, a model for information sharing is offered based on existing bilateral tax treaties and allowing FFIs to report the necessary information to their respective governments rather than to the Internal Revenue Service.
The FATCA agreement has taken two years to negotiate between the two governments, and, while a copy has not yet been released, is said to be a significant improvement in the mechanisms for the exchange of banking and other financial information between the two countries.
In addition, after the signing of the agreement, the Mexican government believes that it is placed amongst the countries with the best practices for the exchange of information, as driven by the Organization for Cooperation and Economic Development and the G20.