US and Vietnam sign new FATCA Agreement

Fatca Agreement Between United States and Vietnam

The U.S. and the Socialist Republic of Viet Nam (Vietnam) have signed an intergovernmental agreement (IGA) to facilitate the implementation of the Foreign Account Tax Compliance Act (FATCA). To date, the U.S. has entered into IGAs with 113 jurisdictions, some of which are agreements in substance. 

According to the Treasury Department, the U.S.-Vietnam IGA is currently “[n]ot treated as in effect” ( Reg. ยง 1.1471-1(b)(78) ). Financial institutions cannot be treated as covered by a Model 1 IGA (including for withholding or registration purposes) until the IGA has entered into force.

 

The US – Vietnam Fatca agreement follows the Model 1 IGA.  Reporting financial institutions under an applicable Model 1 IGA (reporting Model 1 FFIs) would satisfy their Chapter 4 requirements by reporting specified information about U.S. accounts to their government, followed by the automatic exchange of that information on a government-to-government basis with the U.S.

In laymen’s terms, FATCA generally requires withholding agents to withhold tax on certain payments to a foreign financial institutions (FFI) unless it has entered into a FFI agreement with the U.S. to, among other things, report certain information with respect to U.S. accounts. The withholding rules are essentially a mechanism to enforce new reporting requirements. FATCA also imposes withholding, documentation, and reporting requirements on withholding agents, with respect to certain payments made to certain non-financial foreign entities.