U.S., Germany Initial FATCA-Based Tax Agreement

Germany's Finance Ministry announced on February 22 that Germany and the United States had initialed an Intergovernmental Agreement ("IGA") based on the Foreign Account Tax Compliance Act ("FATCA") to encourage tax compliance. The agreement is based on the reciprocal Model 1 agreement published by the U.S. Treasury last July.

According to the German Finance Ministry, the IGA will include the following:

• Germany will commit to make the information of U.S. customers with accounts at German banks available to U.S. authorities.
• In return, the United States will need to disclose information to German tax authorities on interest and the dividend payments which U.S. tax authorities levy from U.S. financial institutions.
• The United States will agree to exempt all financial institutions based in Germany from the obligation to make agreements with the U.S. Treasury Department to avoid withholding tax under FATCA.

The text of the agreement has not yet been released. Germany and the United States will now establish the preconditions so that the agreement can be signed soon, Germany's Finance Ministry said.