On November 19, 2012, the Mexican Undersecretary of Revenue, José Antonio González Anaya, and 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). The agreement implements the provisions of FATCA, which was included as part of the 2010 HIRE Act. FATCA requires foreign financial institutions, including hedge funds, to report on the holdings of U.S. taxpayers to the Internal Revenue Service (IRS), or face harsh penalties.
The FATCA agreement establishes a common approach to combating tax evasion based on the automatic exchange of information between the U.S. and Mexico. Since 2010, the Treasury Department has been striking agreements with foreign governments to require U.S. banks to report on the holdings of foreign taxpayers to their respective countries’ tax authorities.
The bilateral agreement implements FATCA, requiring financial institutions to report the holdings of U.S. and Mexican taxpayers to each other’s tax authorities. The government-to-government agreement, as signed between the US and Mexico, contains a model for sharing information based on existing bilateral tax treaties and allowing Foreign Financial Institutions to report the necessary information to their respective governments rather than to the IRS. The agreement does not contain any exemptions from FATCA.
To date, the U.S. has also reached agreements with the United Kingdom and Denmark. Additionally, the U.S. has published joint statements with the United Kingdom, France, Germany, Italy, Japan, Spain and Switzerland. The Treasury Department recently announced that it is in talks with more than 50 other countries and jurisdictions regarding FATCA implementation and compliance.
The Treasury had hoped to conclude the negotiations with Mexico by the end of the 2012. The current agreement was negotiated under the terms of existing 1989 and 1992 tax treaties between the U.S. and Mexico.
To read the agreement between Mexico and the United States, click here.