The governments of US and Chile have signed a Model 2 intergovernmental agreement (IGA) to implement the Foreign Account Tax Compliance Act (FATCA).
The act, which was enacted in 2010 by the US Congress, is aimed at obtaining financial information of US entities related to account ownership, balances and amounts moving in and out of the accounts that are held abroad at foreign financial institutions (FFIs).
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Non-disclosure of information by an FFI will result in a requirement to hold back 30% tax on payments of US-sourced income, reported tax-news.com.
Under the terms of the Model 2 IGA there is no automatic exchange of information, and each FFI located in Chile will be required to enter into a separate agreement with the US Internal Revenue Service (IRS), because they will have to report individual US account holder information directly to the IRS.
However, consistent with Chilean legislation, FFIs will only be able to provide the aggregate disclosure of those "recalcitrant" account holders who do not agree to the transmission of their data to the IRS, according to the publication.
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