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Foreign Account Tax Compliance Act ("FATCA")

During July 2012, the United States Treasury Department released both reciprocal and non-reciprocal versions of model intergovernmental agreements for implementing the Foreign Account Tax Compliance Act (“FATCA”) with other countries.  These model agreements were developed in consultation with the United Kingdom, Spain, Italy, France and Germany.

In a classic example of the old adage “America sneezes and the world catches a cold,” the International Development Committee of the United Kingdom’s Parliament recommended that rather than enter into bilateral agreements with other jurisdictions, similar legislation to FATCA should instead be established, which would be aimed to prevent cross-border tax evasion by British citizens.

On August 28, 2012, the Bahamian Minister of Financial Services stated that a decision has not yet been reached as to whether to enter into an intergovernmental agreement with the United States regarding FATCA.  The Bahamas has a choice of whether to allow its individual institutions to comply by signing their own agreements with the Internal Revenue Service or to agree to an intergovernmental deal where the Bahamian government would supply the United States with appropriate information.  Before reaching a final decision, the Bahamian government wishes to obtain a thorough understanding and assessment of the financial services industry.

Switzerland’s Federal Council announced on August 29, 2012, as part of efforts to ensure that Swiss banks remain highly competitive and safe, that they will soon enter into negotiations with the United States over a framework agreement for the simplified implementation of FATCA.

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