[authors: Sherwin P. Simmons, II
, Jonathan E. Gopman
, Barbara E. Ruiz-Gonzalez
, and Elysa R. Merlin
The United States has entered into its second and third bilateral agreements regarding the implementation of FATCA with Denmark and Mexico, respectively. FATCA was enacted in 2010 as part of the Hiring Incentives to Restore Employment Act and targets non-compliant U.S. taxpayers owning foreign accounts. Both agreements are expected to become effective on January 1, 2013.
The United States signed its agreement with Denmark on November 15, 2012 (the "Denmark Agreement") and signed its agreement with Mexico on November 19, 2012 (the "Mexico Agreement"). The United States signed its first FATCA intergovernmental agreement with the United Kingdom (the "U.K. Agreement") on September 12, 2012. See Practice Update
. Like the U.K. Agreement, both the Denmark and Mexico Agreements use the government-to-government approach for implementing FATCA, based on the reciprocal Model I agreement published by the Treasury in July 2012. See Practice Update
. In addition to the Model I agreement that serves as the basis for the U.K., Denmark, and Mexico Agreements, the Treasury has also released a Model II agreement
, which uses a business-to-government approach.
Both the Denmark and Mexico Agreements, like the U.K. Agreement, include three (3) new requirements not found in the Model I Agreement. In each agreement, Article 7 grants the country the benefit of any more favorable terms that the United States may enter into in a later agreement with another country. Article 8 of the Denmark and Mexico Agreements provides for consultations between the parties should any difficulties in implementing the agreements arise, and, further, stipulates that the agreements can be amended with the countries' written mutual consent. Finally, the agreements specify that the annexes form an integral part of the agreement.
The reciprocal nature of the United States' agreements with Denmark and Mexico will allow the countries to use the automatic exchange of information to discover non-compliant taxpayers. The agreements alleviate any legal impediments and burdens for FATCA compliance by Danish and Mexican financial institutions.