France, Germany, Italy, Spain and the United Kingdom have developed a model agreement with the US for the implementation of the Foreign Account Tax Compliance Act (FATCA). Under FATCA, US taxpayers with specified foreign financial assets that exceed certain thresholds must report those assets to the IRS. In addition, FATCA will require foreign financial institutions to report directly to the IRS information about financial accounts held by US taxpayers, or held by foreign entities in which U.S. taxpayers hold a substantial ownership interest.

There are two versions of the model agreement – a reciprocal version and a nonreciprocal version. According to the US Treasury both versions establish a framework for reporting by financial institutions of certain financial account information to their respective tax authorities, followed by automatic exchange of such information under existing bilateral tax treaties or tax information exchange agreements. Both versions of the model agreement also address the legal issues that had been raised in connection with FATCA, and simplify its implementation for financial institutions.

The reciprocal version of the model also provides for the US to exchange information currently collected on accounts held in US financial institutions by residents of partner countries, and includes a policy commitment to pursue regulations and support legislation that would provide for equivalent levels of exchange by the US. This version of the model agreement will be available only to jurisdictions with whom the US has an income tax treaty or tax information exchange agreement in place.