AGREEMENT BETWEEN SPAIN AND USA FOR FOREIGN ACCOUNT TAX COMPLIANCE ACT - FATCA
Agreement Between the United States of America and the Kingdom of
Spain to Improve International Tax Compliance and to Implement FATCA
Whereas, the United States of America and the Kingdom of Spain (each, a
“Party”) have a longstanding and close relationship with respect to mutual
assistance in tax matters and desire to conclude an agreement to improve
international tax compliance by further building on that relationship,
Whereas, Article 27 of the Convention between the United States of America
and the Kingdom of Spain for the Avoidance of Double Taxation and the
Prevention of Fiscal Evasion with Respect to Taxes on Income and its Protocol,
done at Madrid on February 22, 1990, (“the Convention”) authorizes exchange
of information for tax purposes, including on an automatic basis,
Whereas, the United States of America enacted provisions commonly known as
the Foreign Account Tax Compliance Act (“FATCA”), which introduce a
reporting regime for financial institutions with respect to certain accounts,
Whereas, the Kingdom of Spain is supportive of the underlying policy goal of
FATCA to improve tax compliance,
Whereas, FATCA has raised a number of issues, including that Spanish financial
institutions may not be able to comply with certain aspects of FATCA due to
domestic legal impediments,
Whereas, the United States of America collects information regarding certain
accounts maintained by U.S. financial institutions held by residents of Spain
and is committed to exchanging such information with the Kingdom of Spain
and pursuing equivalent levels of exchange,
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tax compliance and provide for the implementation of FATCA based on
domestic reporting and reciprocal automatic exchange pursuant to the
Convention and subject to the confidentiality and other protections provided for
therein, including the provisions limiting the use of the information exchanged
under the Convention.
Now, therefore, the Parties have agreed as follows:
Article 1
Definitions
1. For purposes of this agreement and any annexes thereto (“Agreement”),
the following terms shall have the meanings set forth below:
a) The term “United States” means the United States of America,
including the States thereof, and, when used in a geographical
sense, means the territory of the United States of America,
including inland waters, the air space, the territorial sea thereof and
any maritime area beyond the territorial sea within which the
United States may exercise sovereign rights or jurisdiction in
accordance with international law; the term, however, does not
include the U.S. Territories. Any reference to a “State” of the
United States includes the District of Columbia.
b) The term “U.S. Territory” means American Samoa, the
Commonwealth of the Northern Mariana Islands, Guam, the
Commonwealth of Puerto Rico, or the U.S. Virgin Islands.
c) The term “IRS” means the U.S. Internal Revenue Service.
d) The term “Spain” means the Kingdom of Spain and, when used in
a geographical sense, means the territory of the Kingdom of Spain,
including inland waters, the air space, the territorial sea and any
maritime area outside the territorial sea upon which, in accordance
with international law and on application of its domestic
legislation, the Kingdom of Spain exercises or may exercise in the
future jurisdiction or sovereign rights with respect to the seabed, its
subsoil and superjacent waters, and their natural resources.
e) The term “Partner Jurisdiction” means a jurisdiction that has in
effect an agreement with the United States to facilitate the
implementation of FATCA. The IRS shall publish a list identifying
all Partner Jurisdictions.
f) The term “Competent Authority” means:
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(1) in the case of the United States, the Secretary of the Treasury
or his delegate; and
(2) in the case of Spain, the Minister of Finance and Public
Administrations or his authorized representative.
g) The term “Financial Institution” means a Custodial Institution, a
Depository Institution, an Investment Entity, or a Specified
Insurance Company.
h) The term “Custodial Institution” means any entity that holds, as a
substantial portion of its business, financial assets for the account
of others. An entity holds financial assets for the account of others
as a substantial portion of its business if the entity’s gross income
attributable to the holding of financial assets and related financial
services equals or exceeds 20 percent of the entity’s gross income
during the shorter of: (i) the three-year period that ends on
December 31 (or the final day of a non-calendar year accounting
period) prior to the year in which the determination is being made;
or (ii) the period during which the entity has been in existence.
i) The term “Depository Institution” means any entity that accepts
deposits in the ordinary course of a banking or similar business.
j) The term “Investment Entity” means any entity that conducts as a
business (or is managed by an entity that conducts as a business)
one or more of the following activities or operations for or on
behalf of a customer:
(1) trading in money market instruments (cheques, bills,
certificates of deposit, derivatives, etc.); foreign exchange;
exchange, interest rate and index instruments; transferable
securities; or commodity futures trading;
(2) individual and collective portfolio management; or
(3) otherwise investing, administering, or managing funds or
money on behalf of other persons.
This subparagraph 1(j) shall be interpreted in a manner consistent
with similar language set forth in the definition of “financial
institution” in the Financial Action Task Force Recommendations.
k) The term “Specified Insurance Company” means any entity that
is an insurance company (or the holding company of an insurance
Whereas, the Parties are committed to working together over the longer term
towards achieving common reporting and due diligence standards for financial
institutions,
Whereas, the United States of America acknowledges the need to coordinate the
reporting obligations under FATCA with other U.S. tax reporting obligations of
Spanish financial institutions to avoid duplicative reporting,
Whereas, an intergovernmental approach to FATCA implementation would
address legal impediments and reduce burdens for Spanish financial institutions,
Whereas, the Parties desire to conclude an agreement to improve international
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company) that issues, or is obligated to make payments with
respect to, a Cash Value Insurance Contract or an Annuity Contract.
l) The term “Spanish Financial Institution” means (i) any Financial
Institution resident in Spain, but excluding any branches of such
Financial Institution that are located outside Spain, and (ii) any
branch of a Financial Institution not resident in Spain, if such
branch is located in Spain.
m) The term “Partner Jurisdiction Financial Institution” means (i)
any Financial Institution resident in a Partner Jurisdiction, but
excluding any branches of such Financial Institution that are
located outside the Partner Jurisdiction, and (ii) any branch of a
Financial Institution not resident in the Partner Jurisdiction, if such
branch is located in the Partner Jurisdiction.
n) The term “Reporting Financial Institution” means a Reporting
Spanish Financial Institution or a Reporting U.S. Financial
Institution, as the context requires.
o) The term “Reporting Spanish Financial Institution” means any
Spanish Financial Institution that is not a Non-Reporting Spanish
Financial Institution.
p) The term “Reporting U.S. Financial Institution” means (i) any
Financial Institution that is resident in the United States, but
excluding any branches of such Financial Institution that are
located outside the United States, and (ii) any branch of a Financial
Institution not resident in the United States, if such branch is
located in the United States, provided that the Financial Institution
or branch has control, receipt, or custody of income with respect to
which information is required to be exchanged under subparagraph
(2)(b) of Article 2 of this Agreement.
q) The term “Non-Reporting Spanish Financial Institution” means
any Spanish Financial Institution, or other entity resident in Spain
that is identified in Annex II as a Non-Reporting Spanish Financial
Institution or that otherwise qualifies as a deemed-compliant FFI,
an exempt beneficial owner, or an excepted FFI under relevant U.S.
Treasury Regulations.
r) The term “Nonparticipating Financial Institution” means a
nonparticipating FFI, as that term is defined in relevant U.S.
Treasury Regulations, but does not include a Spanish Financial
Institution or other Partner Jurisdiction Financial Institution other
than a Financial Institution identified as a Nonparticipating
Financial Institution pursuant to paragraph 2 of Article 5.
s) The term “Financial Account” means an account maintained by a
Financial Institution, and includes:
(1) in the case of an entity that is a Financial Institution solely
because it is an Investment Entity, any equity or debt interest
(other than interests that are regularly traded on an
established securities market) in the Financial Institution;
(2) in the case of a Financial Institution not described in
subparagraph 1(s)(1) above, any equity or debt interest in the
Financial Institution (other than interests that are regularly
traded on an established securities market), if (i) the value
of the debt or equity interest is determined, directly or
indirectly, primarily by reference to assets that give rise to
U.S. Source Withholdable Payments, and (ii) the class of
interests was established with a purpose of avoiding
reporting in accordance with this Agreement; and
(3) any Cash Value Insurance Contract and any Annuity
Contract issued or maintained by a Financial Institution,
other than a noninvestment-linked, nontransferable
immediate life annuity that is issued to an individual and
monetizes a pension or disability benefit provided under an
account, product, or arrangement identified as excluded from
the definition of Financial Account in Annex II.
Notwithstanding the foregoing, the term “Financial Account” does
not include any account, product, or arrangement identified as
excluded from the definition of Financial Account in Annex II.
t) The term “Depository Account” includes any commercial,
checking, savings, time, or thrift account, or an account that is
evidenced by a certificate of deposit, thrift certificate, investment
certificate, certificate of indebtedness, or other similar instrument
maintained by a Financial Institution in the ordinary course of a
banking or similar business. A Depository Account also includes
an amount held by an insurance company pursuant to a guaranteed
investment contract or similar agreement to pay or credit interest
thereon.
u) The term “Custodial Account” means an account (other than an
Insurance Contract or Annuity Contract) for the benefit of another
person that holds any financial instrument or contract held for
investment (including, but not limited to, a share or stock in a
corporation, a note, bond, debenture, or other evidence of
indebtedness, a currency or commodity transaction, a credit default
swap, a swap based upon a nonfinancial index, a notional principal
contract, an Insurance Contract or Annuity Contract, and any
option or other derivative instrument).
v) The term “Equity Interest” means, in the case of a partnership
that is a Financial Institution, either a capital or profits interest in
the partnership. In the case of a trust that is a Financial Institution,
an Equity Interest is considered to be held by any person treated as
a settlor or beneficiary of all or a portion of the trust, or any other
natural person exercising ultimate effective control over the trust.
A Specified U.S. Person shall be treated as being a beneficiary of a
foreign trust if such Specified U.S. Person has the right to receive
directly or indirectly (for example, through a nominee) a
mandatory distribution or may receive, directly or indirectly, a
discretionary distribution from the trust.
w) The term “Insurance Contract” means a contract (other than an
Annuity Contract) under which the issuer agrees to pay an amount
upon the occurrence of a specified contingency involving mortality,
morbidity, accident, liability, or property risk.
x) The term “Annuity Contract” means a contract under which the
issuer agrees to make payments for a period of time determined in
whole or in part by reference to the life expectancy of one or more
individuals. The term also includes a contract that is considered to
be an Annuity Contract in accordance with the law, regulation, or
practice of the jurisdiction in which the contract was issued, and
under which the issuer agrees to make payments for a term of
years.
y) The term “Cash Value Insurance Contract” means an Insurance
Contract (other than an indemnity reinsurance contract between
two insurance companies) that has a Cash Value greater than
$50,000.
z) The term “Cash Value” means the greater of (i) the amount that
the policyholder is entitled to receive upon surrender or termination
of the contract (determined without reduction for any surrender
charge or policy loan), and (ii) the amount the policyholder can
borrow under or with regard to the contract. Notwithstanding the
foregoing, the term “Cash Value” does not include an amount
payable under an Insurance Contract as:
(1) a personal injury or sickness benefit or other benefit
providing indemnification of an economic loss incurred
upon the occurrence of the event insured against;
(2) a refund to the policyholder of a previously paid premium
under an Insurance Contract (other than under a life
insurance contract) due to policy cancellation or termination,
decrease in risk exposure during the effective period of the
Insurance Contract, or arising from a redetermination of the
premium due to correction of posting or other similar error;
or
(3) a policyholder dividend based upon the underwriting
experience of the contract or group involved.
aa) The term “Preexisting Account” means a Financial Account
maintained by a Reporting Financial Institution as of December 31,
2013.
bb) The term “Reportable Account” means a U.S. Reportable
Account or a Spanish Reportable Account, as the context requires.
cc) The term “Spanish Reportable Account” means a Financial
Account maintained by a Reporting U.S. Financial Institution if:
(i) in the case of a Depository Account, the account is held by an
individual resident in Spain and more than $10 of interest is paid to
such account in any given calendar year; or (ii) in the case of a
Financial Account other than a Depository Account, the Account
Holder is a resident of Spain, including entities that certify that
they are resident in Spain for tax purposes, with respect to which
U.S. source income that is subject to reporting under chapter 3 or
chapter 61 of subtitle A of the U.S. Internal Revenue Code is paid
or credited.
dd) The term “U.S. Reportable Account” means a Financial Account
maintained by a Reporting Spanish Financial Institution and held
by one or more Specified U.S. Persons or by a Non-U.S. Entity
with one or more Controlling Persons that is a Specified U.S.
Person. Notwithstanding the foregoing, an account shall not be
treated as a U.S. Reportable Account if such account is not
identified as a U.S. Reportable Account after application of the due
diligence procedures in Annex I.
ee) The term “Account Holder” means the person listed or identified
as the holder of a Financial Account by the Financial Institution
that maintains the account. A person, other than a Financial
Institution, holding a Financial Account for the benefit or account
of another person as agent, custodian, nominee, signatory,
investment advisor, or intermediary, is not treated as holding the
account for purposes of this Agreement, and such other person is
treated as holding the account. In the case of a Cash Value
Insurance Contract or an Annuity Contract, the Account Holder is
any person entitled to access the Cash Value or change the
beneficiary of the contract. If no person can access the Cash Value
or change the beneficiary, the Account Holders are any person
named as the owner in the contract and any person with a vested
entitlement to payment under the terms of the contract. Upon the
maturity of a Cash Value Insurance Contract or an Annuity
Contract, each person entitled to receive a payment under the
contract is treated as an Account Holder.
ff) The term “U.S. Person” means a U.S. citizen or resident
individual, a partnership or corporation organized in the United
States or under the laws of the United States or any State thereof, a
trust if (i) a court within the United States would have authority
under applicable law to render orders or judgments concerning
substantially all issues regarding administration of the trust, and (ii)
one or more U.S. persons have the authority to control all
substantial decisions of the trust, or an estate of a decedent that is a
citizen or resident of the United States. This subparagraph 1(ff)
shall be interpreted in accordance with the U.S. Internal Revenue
Code.
gg) The term “Specified U.S. Person” means a U.S. Person, other
than: (i) a corporation the stock of which is regularly traded on one
or more established securities markets; (ii) any corporation that is a
member of the same expanded affiliated group, as defined in
section 1471(e)(2) of the U.S. Internal Revenue Code, as a
corporation described in clause (i); (iii) the United States or any
wholly owned agency or instrumentality thereof; (iv) any State of
the United States, any U.S. Territory, any political subdivision of
any of the foregoing, or any wholly owned agency or
instrumentality of any one or more of the foregoing; (v) any
organization exempt from taxation under section 501(a) or an
individual retirement plan as defined in section 7701(a)(37) of the
U.S. Internal Revenue Code; (vi) any bank as defined in section
581 of the U.S. Internal Revenue Code; (vii) any real estate
investment trust as defined in section 856 of the U.S. Internal
Revenue Code; (viii) any regulated investment company as defined
in section 851 of the U.S. Internal Revenue Code or any entity
registered with the Securities Exchange Commission under the
Investment Company Act of 1940 (15 U.S.C. 80a-64); (ix) any
common trust fund as defined in section 584(a) of the U.S. Internal
Revenue Code; (x) any trust that is exempt from tax under section
664(c) of the U.S. Internal Revenue Code or that is described in
section 4947(a)(1) of the U.S. Internal Revenue Code; (xi) a dealer
in securities, commodities, or derivative financial instruments
(including notional principal contracts, futures, forwards, and
options) that is registered as such under the laws of the United
States or any State; or (xii) a broker as defined in section 6045(c)
of the U.S. Internal Revenue Code.
hh) The term “Entity” means a legal person or a legal arrangement
such as a trust.
ii) The term “Non-U.S. Entity” means an Entity that is not a U.S.
Person.
jj) The term “U.S. Source Withholdable Payment” means any
payment of interest (including any original issue discount),
dividends, rents, salaries, wages, premiums, annuities,
compensations, remunerations, emoluments, and other fixed or
determinable annual or periodical gains, profits, and income, if
such payment is from sources within the United States.
Notwithstanding the foregoing, a U.S. Source Withholdable
Payment does not include any payment that is not treated as a
withholdable payment in relevant U.S. Treasury Regulations.
kk) An Entity is a “Related Entity” of another Entity if either Entity
controls the other Entity, or the two Entities are under common
control. For this purpose control includes direct or indirect
ownership of more than 50 percent of the vote or value in an
Entity. Notwithstanding the foregoing, Spain may treat an Entity
as not a Related Entity of another Entity if the two Entities are not
members of the same expanded affiliated group as defined in
section 1471(e)(2) of the U.S. Internal Revenue Code.
ll) The term “U.S. TIN” means a U.S. federal taxpayer identifying
number.
mm) The term “Spanish TIN” means a Spanish taxpayer identifying
number.
nn) The term “Controlling Persons” means the natural persons who
exercise control over an entity. In the case of a trust, such term
means the settlor, the trustees, the protector (if any), the
beneficiaries or class of beneficiaries, and any other natural person
exercising ultimate effective control over the trust, and in the case
of a legal arrangement other than a trust, such term means persons
in equivalent or similar positions. The term “Controlling Persons”
shall be interpreted in a manner consistent with the
Recommendations of the Financial Action Task Force.
2. Any term not otherwise defined in this Agreement shall, unless the
context otherwise requires or the Competent Authorities agree to a common
meaning (as permitted by domestic law), have the meaning that it has at that
time under the law of the Party applying the Agreement, any meaning under the
applicable tax laws of that Party prevailing over a meaning given to the term
under other laws of that Party.
Article 2
Obligations to Obtain and Exchange Information with Respect to
Reportable Accounts
1. Subject to the provisions of Article 3, each Party shall obtain the
information specified in paragraph 2 of this Article with respect to all
Reportable Accounts and shall annually exchange this information with the
other Party on an automatic basis pursuant to the provisions of Article 27 of the
Convention.
2. The information to be obtained and exchanged is:
a) In the case of Spain with respect to each U.S. Reportable Account
of each Reporting Spanish Financial Institution:
(1) the name, address, and U.S. TIN of each Specified U.S.
Person that is an Account Holder of such account and, in the
case of a Non-U.S. Entity that, after application of the due
diligence procedures set forth in Annex I, is identified as
having one or more Controlling Persons that is a Specified
U.S. Person, the name, address, and U.S. TIN (if any) of
such entity and each such Specified U.S. Person;
(2) the account number (or functional equivalent in the absence
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of an account number);
(3) the name and identifying number of the Reporting Spanish
Financial Institution;
(4) the account balance or value (including, in the case of a Cash
Value Insurance Contract or Annuity Contract, the Cash
Value or surrender value) as of the end of the relevant
calendar year or other appropriate reporting period or, if the
account was closed during such year, immediately before
closure;
(5) in the case of any Custodial Account:
(A) the total gross amount of interest, the total gross
amount of dividends, and the total gross amount of
other income generated with respect to the assets held
in the account, in each case paid or credited to the
account (or with respect to the account) during the
calendar year or other appropriate reporting period;
and
(B) the total gross proceeds from the sale or redemption of
property paid or credited to the account during the
calendar year or other appropriate reporting period
with respect to which the Reporting Spanish Financial
Institution acted as a custodian, broker, nominee, or
otherwise as an agent for the Account Holder;
(6) in the case of any Depository Account, the total gross
amount of interest paid or credited to the account during the
calendar year or other appropriate reporting period; and
(7) in the case of any account not described in subparagraph (5)
or (6) of this paragraph, the total gross amount paid or
credited to the Account Holder with respect to the account
during the calendar year or other appropriate reporting
period with respect to which the Reporting Spanish Financial
Institution is the obligor or debtor, including the aggregate
amount of any redemption payments made to the Account
Holder during the calendar year or other appropriate
reporting period.
b) In the case of the United States, with respect to each Spanish
Reportable Account of each Reporting U.S. Financial Institution:
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(1) the name, address, and Spanish TIN of any person that is a
resident of Spain and is an Account Holder of the account;
(2) the account number (or the functional equivalent in the
absence of an account number);
(3) the name and identifying number of the Reporting U.S.
Financial Institution;
(4) the gross amount of interest paid on a Depository Account;
(5) the gross amount of U.S. source dividends paid or credited to
the account; and
(6) the gross amount of other U.S. source income paid or
credited to the account, to the extent subject to reporting
under chapter 3 or 61 of subtitle A of the U.S. Internal
Revenue Code.
Article 3
Time and Manner of Exchange of Information
1. For purposes of the exchange obligation in Article 2, the amount and
characterization of payments made with respect to a U.S. Reportable Account
may be determined in accordance with the principles of Spain’s tax laws, and
the amount and characterization of payments made with respect to a Spanish
Reportable Account may be determined in accordance with principles of U.S.
federal income tax law.
2. For purposes of the exchange obligation in Article 2, the information
exchanged shall identify the currency in which each relevant amount is
denominated.
3. With respect to paragraph 2 of Article 2, information is to be obtained and
exchanged with respect to 2013 and all subsequent years, except that:
a) In the case of Spain:
(1) the information to be obtained and exchanged with respect to
2013 and 2014 is only the information described in
subparagraphs (a)(1) to (a)(4);
(2) the information to be obtained and exchanged with respect to
2015 is the information described in subparagraphs (a)(1) to
(a)(7), except for gross proceeds described in subparagraph
(a)(5)(B); and
(3) the information to be obtained and exchanged with respect to
2016 and subsequent years is the information described in
subparagraph (a)(1) to (a)(7);
b) In the case of the United States, the information to be obtained and
exchanged with respect to 2013 and subsequent years is all of the
information identified in subparagraph (b).
4. Notwithstanding paragraph 3 of this Article, with respect to each
Reportable Account that is a Preexisting Account, and subject to paragraph 4 of
Article 6, the Parties are not required to obtain and include in the exchanged
information the Spanish TIN or the U.S. TIN, as applicable, of any relevant
person if such taxpayer identifying number is not in the records of the Reporting
Financial Institution. In such case, the Parties shall obtain and include in the
exchanged information the date of birth of the relevant person, if the Reporting
Financial Institution has such date of birth in its records.
5. Subject to paragraphs 3 and 4 of this Article, the information described in
Article 2 shall be exchanged within nine months after the end of the calendar
year to which the information relates. Notwithstanding the foregoing, the
information that relates to calendar year 2013 shall be exchanged no later than
September 30, 2015.
6. The Competent Authorities of Spain and the United States shall enter into
an agreement under the mutual agreement procedure provided for in Article 26
of the Convention, which shall:
a) establish the procedures for the automatic exchange obligations
described in Article 2;
b) prescribe rules and procedures as may be necessary to implement
Article 5; and
c) establish as necessary procedures for the exchange of the
information reported under subparagraph 1(b) of Article 4.
7. All information exchanged shall be subject to the confidentiality and
other protections provided for in the Convention, including the provisions
limiting the use of the information exchanged.
Article 4
Application of FATCA to Spanish Financial Institutions
1. Treatment of Reporting Spanish Financial Institutions. Each
Reporting Spanish Financial Institution shall be treated as complying with, and
not subject to withholding under, section 1471 of the U.S. Internal Revenue
Code if Spain complies with its obligations under Articles 2 and 3 with respect
to such Reporting Spanish Financial Institution, and the Reporting Spanish
Financial Institution:
a) identifies U.S. Reportable Accounts and reports annually to the
Spanish Competent Authority the information required to be
reported in subparagraph 2(a) of Article 2 in the time and manner
described in Article 3;
b) for each of 2015 and 2016, reports annually to the Spanish
Competent Authority the name of each Nonparticipating Financial
Institution to which it has made payments and the aggregate
amount of such payments;
c) complies with the registration requirements applicable to Financial
Institutions in Partner Jurisdictions;
d) to the extent that a Reporting Spanish Financial Institution is (i)
acting as a qualified intermediary (for purposes of section 1441 of
the U.S. Internal Revenue Code) that has elected to assume
primary withholding responsibility under chapter 3 of subtitle A of
the U.S. Internal Revenue Code, (ii) a foreign partnership that has
elected to act as a withholding foreign partnership (for purposes of
both sections 1441 and 1471 of the U.S. Internal Revenue Code),
or (iii) a foreign trust that has elected to act as a withholding
foreign trust (for purposes of both sections 1441 and 1471 of the
U.S. Internal Revenue Code), withholds 30 percent of any U.S.
Source Withholdable Payment to any Nonparticipating Financial
Institution; and
e) in the case of a Reporting Spanish Financial Institution that is not
described in subparagraph (d) of this paragraph and that makes a
payment of, or acts as an intermediary with respect to, a U.S.
Source Withholdable Payment to any Nonparticipating Financial
Institution, the Reporting Spanish Financial Institution provides to
any immediate payor of such U.S. Source Withholdable Payment
the information required for withholding and reporting to occur
with respect to such payment.
Notwithstanding the foregoing, a Reporting Spanish Financial Institution with
respect to which the conditions of this paragraph are not satisfied shall not be
subject to withholding under section 1471 of the U.S. Internal Revenue Code
unless such Reporting Spanish Financial Institution is identified by the IRS as a
Nonparticipating Financial Institution pursuant to subparagraph 2(b) of Article
5.
2. Suspension of Rules Relating to Recalcitrant Accounts. The United
States shall not require a Reporting Spanish Financial Institution to withhold tax
under section 1471 or 1472 of the U.S. Internal Revenue Code with respect to
an account held by a recalcitrant account holder (as defined in section
1471(d)(6) of the U.S. Internal Revenue Code), or to close such account, if the
U.S. Competent Authority receives the information set forth in subparagraph
2(a) of Article 2, subject to the provisions of Article 3, with respect to such
account.
3. Specific Treatment of Retirement Plans. The United States shall treat
as a deemed-compliant FFI or exempt beneficial owner, as appropriate, for
purposes of section 1471 of the U.S. Internal Revenue Code Spanish retirement
plans described and identified in Annex II. For this purpose, a Spanish
retirement plan includes an entity established or located in and regulated in
Spain, or a predetermined contractual or legal arrangement, operated to provide
pension or retirement benefits or earn income for providing such benefits under
the laws of Spain and regulated with respect to contributions, distributions,
reporting, sponsorship, and taxation.
4. Identification and Treatment of Other Deemed-Compliant FFIs and
Exempt Beneficial Owners. The United States shall treat each Non-Reporting
Spanish Financial Institution as a deemed-compliant FFI or as an exempt
beneficial owner, as appropriate, for purposes of section 1471 of the U.S.
Internal Revenue Code.
5. Special Rules Regarding Related Entities That Are Nonparticipating
Financial Institutions. If a Spanish Financial Institution, that otherwise meets
the requirements of paragraph 1 of this Article or is described in paragraph 3 or
4 of this Article, has a Related Entity or branch that operates in a jurisdiction
that prevents such Related Entity or branch from fulfilling the requirements of a
participating FFI or deemed-compliant FFI for purposes of section 1471 of the
U.S. Internal Revenue Code, such Spanish Financial Institution shall continue to
be in compliance with the terms of this Agreement and shall continue to be
treated as a deemed-compliant FFI or exempt beneficial owner for purposes of
section 1471 of the U.S. Internal Revenue Code, provided that:
a) the Spanish Financial Institution treats each such Related Entity or
branch as a separate Nonparticipating Financial Institution for
purposes of all the reporting and withholding requirements of this
Agreement and each such Related Entity or branch identifies itself
to withholding agents as a Nonparticipating Financial Institution;
b) each such Related Entity or branch identifies its U.S. accounts and
reports the information with respect to those accounts as required
under section 1471 of the U.S. Internal Revenue Code to the extent
permitted under the relevant laws pertaining to the Related Entity
or branch; and
c) such Related Entity or branch does not specifically solicit U.S.
accounts held by persons that are not resident in the jurisdiction
where such Related Entity or branch is located or accounts held by
Nonparticipating Financial Institutions that are not established in
the jurisdiction where such branch or Related Entity is located, and
such branch or Related Entity is not used by the Spanish Financial
Institution or any other Related Entity to circumvent the
obligations under this Agreement or under section 1471 of the U.S.
Internal Revenue Code, as appropriate.
Article 5
Collaboration on Compliance and Enforcement
1. Minor and Administrative Errors. Subject to any further terms set
forth in a competent authority agreement executed pursuant to paragraph 6 of
Article 3, a Competent Authority can make an inquiry directly to a Reporting
Financial Institution in the other jurisdiction where it has reason to believe that
administrative errors or other minor errors may have led to incorrect or
incomplete information reporting or resulted in other infringements of this
Agreement. The competent authority agreement may provide that a Competent
Authority shall notify the Competent Authority of the other Party when the first-
mentioned Competent Authority makes such an inquiry of a Reporting Financial
Institution in the other jurisdiction regarding the Reporting Financial
Institution’s compliance with the conditions set forth in this Agreement.
2. Significant Non-compliance.
a) A Competent Authority shall notify the Competent Authority of the
other Party when the first-mentioned Competent Authority has
determined that there is significant non-compliance with the
obligations under this Agreement with respect to a Reporting
Financial Institution in the other jurisdiction. The Competent
Authority of such other Party shall apply its domestic law
(including applicable penalties) to address the significant non-
compliance described in the notice.
b) If, in the case of a Reporting Spanish Financial Institution, such
enforcement actions do not resolve the non-compliance within a
period of 18 months after notification of significant non-
compliance is first provided, the United States shall treat the
Reporting Spanish Financial Institution as a Nonparticipating
Financial Institution. The IRS shall make available a list of all
Reporting Spanish Financial Institutions and other Partner
Jurisdiction Financial Institutions that are treated as
Nonparticipating Financial Institutions pursuant to this paragraph.
3. Reliance on Third Party Service Providers. Each Party may allow
Reporting Financial Institutions to use third party service providers to fulfill the
obligations imposed on them by a Party, as contemplated in this Agreement, but
these obligations shall remain the responsibility of the Reporting Financial
Institutions.
4. Prevention of Avoidance. The Parties shall implement as necessary
requirements to prevent Financial Institutions from adopting practices intended
to circumvent the reporting required under this Agreement.
Article 6
Mutual Commitment to Continue to Enhance the Effectiveness of
Information Exchange and Transparency
1. Reciprocity. The United States acknowledges the need to achieve
equivalent levels of reciprocal automatic information exchange with Spain. The
United States is committed to further improve transparency and enhance the
exchange relationship with Spain by pursuing the adoption of regulations and
advocating and supporting relevant legislation to achieve such equivalent levels
of reciprocal automatic exchange.
2. Treatment of Passthru Payments and Gross Proceeds. The Parties are
committed to work together, along with other partners, to develop a practical
and effective alternative approach to achieve the policy objectives of foreign
passthru payment and gross proceeds withholding that minimizes burden.
3. Development of Common Reporting and Exchange Model. The
Parties are committed to working with other partners, the Organisation for
Economic Co-operation and Development, and the European Union, on
adapting the terms of this Agreement to a common model for automatic
exchange of information, including the development of reporting and due
diligence standards for financial institutions.
4. Documentation of Accounts Maintained as of January 1, 2014. With
respect to Reportable Accounts that are Preexisting Accounts maintained by a
Reporting Financial Institution:
a) The United States commits to establish, by January 1, 2017, for
reporting with respect to 2017 and subsequent years, rules
requiring Reporting U.S. Financial Institutions to obtain and report
the Spanish TIN of each Account Holder of a Spanish Reportable
Account as required pursuant to subparagraph 2(b)(1) of Article 2;
and
b) Spain commits to establish, by January 1, 2017, for reporting with
respect to 2017 and subsequent years, rules requiring Reporting
Spanish Financial Institutions to obtain the U.S. TIN of each
Specified U.S. Person as required pursuant to subparagraph 2(a)(1)
of Article 2.
Article 7
Consistency in the Application of FATCA to Partner Jurisdictions
1. Spain shall be granted the benefit of any more favorable terms under Article
4 or Annex I of this Agreement relating to the application of FATCA to Spanish
Financial Institutions afforded to another Partner Jurisdiction under a signed
bilateral agreement pursuant to which the other Partner Jurisdiction commits to
undertake the same obligations as Spain described in Articles 2 and 3 of this
Agreement, and subject to the same terms and conditions as described therein
and in Articles 5 through 9 of the Agreement.
2. The United States shall notify Spain of any such more favorable terms
and shall apply such more favorable terms automatically under this Agreement
as if they were specified in this Agreement and effective as of the date of the
entry into force of the agreement incorporating the more favorable terms.
Article 8
Consultations and Amendments
1. In case any difficulties in the implementation of this Agreement arise, either
Party may request consultations to develop appropriate measures to ensure the
fulfillment of this Agreement.
2. This Agreement may be amended by written mutual consent of the Parties.
Unless otherwise agreed upon, such an amendment shall enter into force
through the same procedures as set forth in paragraph 1 of Article 10.
Article 9
Annexes
The Annexes form an integral part of this Agreement.
Article 10
Term of Agreement
1. The Parties shall notify each other in writing when their necessary
internal procedures for entry into force have been completed. The Agreement
shall enter into force on the date of the later of such written notifications, and
shall continue in force until terminated.
2. Either Party may terminate the Agreement by giving notice of termination
in writing to the other Party. Such termination shall become effective on the
first day of the month following the expiration of a period of 12 months after
the date of the notice of termination.
3. The Parties shall, prior to December 31, 2016, consult in good faith to
amend this Agreement as necessary to reflect progress on the commitments set
forth in Article 6.
In witness whereof, the undersigned, being duly authorized thereto by their
respective Governments, have signed this Agreement.
Done at _____, in duplicate, in the English and Spanish languages, both texts
being equally authentic, this __ day of _____, 20__.
FOR THE UNITED STATES OF FOR THE KINGDOM OF
AMERICA: SPAIN
21
ANNEX I
DUE DILIGENCE OBLIGATIONS FOR IDENTIFYING AND
REPORTING ON U.S. REPORTABLE ACCOUNTS AND ON
PAYMENTS TO CERTAIN NONPARTICIPATING FINANCIAL
INSTITUTIONS
I. General
A. Spain shall require that Reporting Spanish Financial Institutions
apply the due diligence procedures contained in this Annex I to identify
U.S. Reportable Accounts and accounts held by Nonparticipating
Financial Institutions.
B. For purposes of the Agreement,
1. All dollar amounts shall be read to include the equivalent in
other currencies.
2. The balance or value of an account shall be determined as of
the last day of the calendar year or other appropriate reporting
period.
3. Where a balance or value threshold is to be determined as of
the last day of a calendar year under this Annex I, the relevant
balance or value shall be determined as of the last day of the
reporting period that ends with or within that calendar year.
4. Subject to paragraph II.E (1), an account shall be treated as a
U.S. Reportable Account beginning as of the date it is identified as
such pursuant to the due diligence procedures in this Annex I.
5. Unless otherwise provided, information with respect to a
U.S. Reportable Account shall be reported annually in the calendar
year following the year to which the information relates.
C. As an alternative to the procedures described in each section of this
Annex I, Spain may allow its Reporting Spanish Financial Institutions to
rely on the procedures described in relevant U.S. Treasury Regulations to
establish whether an account is a U.S. Reportable Account or an account
held by a Nonparticipating Financial Institution.
II. Preexisting Individual Accounts. The following rules and procedures
apply for identifying U.S. Reportable Accounts among Preexisting Accounts
held by individuals (“Preexisting Individual Accounts”).
A. Accounts Not Required to Be Reviewed, Identified, or
Reported. Unless the Reporting Spanish Financial Institution
elects otherwise, where the implementing rules in Spain provide
for such an election, the following accounts are not required to be
reviewed, identified, or reported as U.S. Reportable Accounts:
1. Subject to subparagraph E (2) of this section, Preexisting
Individual Accounts with a balance or value that does not exceed
$50,000 as of December 31, 2013.
2. Subject to subparagraph E (2) of this section, Preexisting
Individual Accounts that are Cash Value Insurance Contracts and
Annuity Contracts with a balance or value of $250,000 or less as of
December 31, 2013.
3. Preexisting Individual Accounts that are Cash Value
Insurance Contracts or Annuity Contracts, provided the law or
regulations of Spain or the United States effectively prevents the
sale of Cash Value Insurance Contracts or Annuity Contracts to
U.S. residents, such as if the relevant Financial Institution does not
have the required registration under U.S. law, and the law of Spain
requires reporting or withholding with respect to insurance
products held by residents of Spain.
4. Any Depository Account with a balance or value of $50,000
or less.
B. Review Procedures for Preexisting Individual Accounts With a
Balance or Value as of December 31, 2013, that Exceeds
$50,000 ($250,000 for a Cash Value Insurance Contract or
Annuity Contract), But Does Not Exceed $1,000,000 (“Lower
Value Accounts”)
1. Electronic Record Search. The Reporting Spanish
Financial Institution must review electronically searchable data
maintained by the Reporting Spanish Financial Institution for any
of the following U.S. indicia:
a) Identification of the Account Holder as a U.S. citizen
or resident;
b) Unambiguous indication of a U.S. place of birth;
c) Current U.S. mailing or residence address (including a
U.S. post office box or U.S. “in-care-of” address);
d) Current U.S. telephone number;
e) Standing instructions to transfer funds to an account
maintained in the United States;
f) Currently effective power of attorney or signatory
authority granted to a person with a U.S. address; or
g) An “in-care-of” or “hold mail” address that is the sole
address the Reporting Spanish Financial Institution has on
file for the Account Holder. In the case of a Preexisting
Individual Account that is a Lower Value Account, an “in-
care-of” address outside the United States shall not be
treated as U.S. indicia.
2. If none of the U.S. indicia listed in subparagraph B (1) of
this section are discovered in the electronic search, then no further
action is required until there is a change in circumstances described
in subparagraph C (2) of this section with respect to the account
that results in one or more U.S. indicia being associated with the
account.
3. If any of the U.S. indicia in subparagraph B (1) of this
section are discovered in the electronic search, then the Reporting
Spanish Financial Institution must treat the account as a U.S.
Reportable Account unless it elects to apply subparagraph B (4) of
this section and one of the exceptions in such subparagraph applies
with respect to that account.
4. Notwithstanding a finding of U.S. indicia under
subparagraph B (1) of this section, a Reporting Spanish Financial
Institution is not required to treat an account as a U.S. Reportable
Account if:
a) Where Account Holder information unambiguously
indicates a U.S. place of birth, the Reporting Spanish
Financial Institution obtains or has previously reviewed and
maintains a record of:
(1) a self-certification that the Account Holder is
neither a U.S. citizen nor a U.S. resident for tax
purposes (which may be on an IRS Form W-8 or other
similar agreed form);
(2) a non-U.S. passport or other government-
issued identification evidencing the Account Holder’s
citizenship or nationality in a country other than the
United States; and
(3) a copy of the Account Holder’s Certificate of
Loss of Nationality of the United States or a
reasonable explanation of:
(a) the reason the Account Holder does not
have such a certificate despite renouncing U.S.
citizenship; or
(b) the reason the Account Holder did not
obtain U.S. citizenship at birth.
b) Where Account Holder information contains a
current U.S. mailing or residence address, or one or more
U.S. telephone numbers that are the only telephone
numbers associated with the account, the Reporting
Spanish Financial Institution obtains or has previously
reviewed and maintains a record of:
(1) a self-certification that the Account Holder is
not a U.S. citizen or resident for tax purposes (which
may be on an IRS Form W-8 or other similar agreed
form); and
(2) a non-U.S. passport or other government-issued
identification evidencing the Account Holder’s
citizenship or nationality in a country other than the
United States.
c) Where Account Holder information contains standing
instructions to transfer funds to an account maintained in
the United States, the Reporting Spanish Financial
Institution obtains or has previously reviewed and maintains
a record of:
(1) a self-certification that the Account Holder is
not a U.S. citizen or resident for tax purposes (which
may be on an IRS Form W-8 or other similar agreed
form); and
(2) documentary evidence, as defined in paragraph
VI.D of this Annex I, establishing the Account
Holder’s non-U.S. status.
d) Where Account Holder information contains a
currently effective power of attorney or signatory authority
granted to a person with a U.S. address, has an “in care
of” address or “hold mail” address that is the sole address
identified for the Account Holder, or has one or more U.S.
telephone numbers (if a non-U.S. telephone number is also
associated with the account), the Reporting Spanish
Financial Institution obtains or has previously reviewed and
maintains a record of:
(1) a self-certification that the Account Holder is
not a U.S. citizen or resident for tax purposes (which
may be on an IRS Form W-8 or other similar agreed
form); or
(2) documentary evidence, as defined in paragraph
VI.D of this Annex I, establishing the Account
Holder’s non-U.S. status.
C. Additional Procedures Applicable to Preexisting Individual
Accounts That Are Lower Value Accounts
1. Review of Preexisting Individual Accounts that are Lower
Value Accounts for U.S. indicia must be completed by December
31, 2015.
2. If there is a change of circumstances with respect to a
Preexisting Individual Account that is a Lower Value Account that
results in one or more U.S. indicia described in subparagraph B (1)
of this section being associated with the account, then Reporting
Spanish Financial Institution must treat the account as a U.S.
Reportable Account unless subparagraph B (4) of this section
applies.
3. Except for Depository Accounts described in subparagraph A
(4) of this section, any Preexisting Individual Account that has
been identified as a U.S. Reportable Account under this section
shall be treated as a U.S. Reportable Account in all subsequent
years, unless the Account Holder ceases to be a Specified U.S.
Person.
D. Enhanced Review Procedures for Preexisting Individual
Accounts With a Balance or Value That Exceeds $1,000,000 as of
December 31, 2013, or December 31 of Any Subsequent Year (“High-
Value Accounts”)
1. Electronic Record Search. The Reporting Spanish
Financial Institution must review electronically searchable data
maintained by the Reporting Spanish Financial Institution for any
of the U.S. indicia identified in subparagraph B (1) of this section.
2. Paper Record Search. If the Reporting Spanish Financial
Institution’s electronically searchable databases include fields for
and capture all of the information identified in subparagraph D (3)
of this section, then no further paper record search is required. If
the electronic databases do not capture all of this information, then
with respect to High Value Accounts, the Reporting Spanish
Financial Institution must also review the current customer master
file and, to the extent not contained in the current customer master
file, the following documents associated with the account and
obtained by the Reporting Spanish Financial Institution within the
last five years for any of the U.S. indicia identified in subparagraph
B (1) of this section:
a) the most recent documentary evidence collected with
respect to the account;
b) the most recent account opening contract or
documentation;
c) the most recent documentation obtained by the
Reporting Spanish Financial Institution pursuant to
AML/KYC Procedures or for other regulatory purposes;
27
d) any power of attorney or signature authority forms
currently in effect; and
e) any standing instructions to transfer funds currently in
effect.
3. Exception Where Databases Contain Sufficient
Information. A Reporting Spanish Financial Institution is not
required to perform the paper record search described in
subparagraph D (2) of this section if the Reporting Spanish
Financial Institution’s electronically searchable information
includes the following:
a) the Account Holder’s nationality or residence status;
b) the Account Holder’s residence address and mailing
address currently on file with the Reporting Spanish
Financial Institution;
c) the Account Holder’s telephone number(s) currently
on file, if any, with the Reporting Spanish Financial
Institution;
d) whether there are standing instructions to transfer
funds in the account to another account (including an
account at another branch of the Reporting Spanish Financial
Institution or another Financial Institution);
e) whether there is a current “in care of” address or “hold
mail” address for the Account Holder; and
f) whether there is any power of attorney or signatory
authority for the account.
4. Relationship Manager Inquiry for Actual Knowledge. In
addition to the electronic and paper record searches described
above, the Reporting Spanish Financial Institution must treat as
U.S. Reportable Accounts any High Value Accounts assigned to a
relationship manager (including any accounts aggregated with such
account) if the relationship manager has actual knowledge that the
Account Holder is a Specified U.S. Person.
5. Effect of Finding U.S. Indicia
a) If none of the U.S. indicia listed in subparagraph B (1)
of this section are discovered in the enhanced review of High
Value Accounts described above, and the account is not
identified as held by a Specified U.S. Person in subparagraph
D (4) of this section, then no further action is required until
there is a change in circumstances described in subparagraph
E (4) of this section.
b) If any of the U.S. indicia listed in subparagraph B (1)
of this section are discovered in the enhanced review of High
Value Accounts described above, or if there is a subsequent
change in circumstances that results in one or more U.S.
indicia being associated with the account, then the Reporting
Spanish Financial Institution must treat the account as a U.S.
Reportable Account unless subparagraph B (4) of this
section applies.
c) Except for Depository Accounts described in
paragraph A (4) of this section, any Preexisting Individual
Account that has been identified as a U.S. Reportable
Account under this section shall be treated as a U.S.
Reportable Account in all subsequent years, unless the
Account Holder ceases to be a Specified U.S. Person.
E. Additional Procedures Applicable to High Value Accounts
1. If a Preexisting Individual Account is a High Value Account
as of December 31, 2013, the Reporting Spanish Financial
Institution must complete the enhanced review procedures
described in paragraph D of this section with respect to such
account by December 31, 2014. If based on this review such
account is identified as a U.S. Reportable Account, the Reporting
Spanish Financial Institution must report the required information
about such account with respect to 2013 and 2014 in the first report
on the account. For all subsequent years, information about the
account should be reported on an annual basis.
2. If a Preexisting Individual Account is not a High Value
Account as of December 31, 2013, but becomes a High Value
Account as of the last day of a subsequent calendar year, the
Reporting Spanish Financial Institution must complete the
enhanced review procedures described in paragraph D of this
section with respect to such account within six months after the last
day of the calendar year in which the account becomes a High
Value Account. If based on this review such account is identified
as a U.S. Reportable Account, the Reporting Spanish Financial
Institution must report the required information about such account
with respect to the year in which it is identified as a U.S.
Reportable Account and subsequent years on an annual basis.
3. Once a Reporting Spanish Financial Institution applies the
enhanced review procedures set forth above to a High Value
Account, the Reporting Spanish Financial Institution shall not be
required to re-apply such procedures, other than the relationship
manager inquiry in subparagraph D (4) of this section, to the same
High Value Account in any subsequent year.
4. If there is a change of circumstances with respect to a High
Value Account that results in one or more U.S. indicia described in
subparagraph B (1) of this section being associated with the
account, then the Reporting Spanish Financial Institution must treat
the account as a U.S. Reportable Account unless subparagraph B
(4) of this section applies.
5. A Reporting Spanish Financial Institution must implement
procedures to ensure that a relationship manager identifies any
change in circumstances of an account. For example, if a
relationship manager is notified that the Account Holder has a new
mailing address in the United States, the Reporting Spanish
Financial Institution shall be required to treat the new address as a
change in circumstances and shall be required to obtain the
appropriate documentation from the Account Holder.
III. New Individual Accounts. The following rules and procedures apply
for identifying U.S. Reportable Accounts among accounts held by individuals
and opened on or after January 1, 2014 (“New Individual Accounts”).
A. Accounts Not Required to Be Reviewed, Identified or
Reported. Unless the Reporting Spanish Financial Institution elects
otherwise where the implementing rules in Spain provide for such an
election:
1. A New Individual Account that is a Depository Account is
not required to be reviewed, identified, or reported as a U.S.
Reportable Account unless the account balance exceeds $50,000 at
the end of any calendar year or other appropriate reporting period.
2. A New Individual Account that is a Cash Value Insurance
Contract is not required to be reviewed, identified, or reported as a
U.S. Reportable Account unless the Cash Value exceeds $50,000 at
the end of any calendar year or other appropriate reporting period.
B. Other New Individual Accounts. With respect to New Individual
Accounts not described in paragraph A of this section, upon account
opening, (or within 90 days after the end of the calendar year in which the
account ceases to be described in paragraph A of this section), the
Reporting Spanish Financial Institution must obtain a self-certification
which may be part of the account opening documentation, that allows the
Reporting Spanish Financial Institution to determine whether the Account
Holder is resident in the United States for tax purposes (for this purpose,
a U.S. citizen is considered to be resident in the United States for tax
purposes, even if the Account Holder is also a tax resident of another
country) and confirm the reasonableness of such self-certification based
on the information obtained by the Reporting Spanish Financial
Institution in connection with the opening of the account, including any
documentation collected pursuant to AML/KYC Procedures.
C. If the self-certification establishes that the Account Holder is
resident in the United States for tax purposes, the Reporting Spanish
Financial Institution must treat the account as a U.S. Reportable Account
and obtain a self-certification that includes the Account Holder’s U.S.
TIN (which may be an IRS Form W-9 or other similar agreed form).
D. If there is a change of circumstances with respect to a New
Individual Account that causes the Reporting Spanish Financial
Institution to know or have reason to know that the original self-
certification is incorrect or unreliable, the Reporting Spanish Financial
Institution cannot rely on the original self-certification and must obtain a
valid self-certification that establishes whether the Account Holder is a
U.S. citizen or resident for U.S. tax purposes. If the Reporting Spanish
Financial Institution is unable to obtain a valid self-certification, the
Reporting Spanish Financial Institution must treat the account as a U.S.
Reportable Account.
IV. Preexisting Entity Accounts. The following rules and procedures apply
for purposes of identifying U.S. Reportable Accounts and accounts held by a
Nonparticipating Financial Institutions among Preexisting Accounts held by
entities (“Preexisting Entity Accounts”).
A. Entity Accounts Not Required to Be Reviewed, Identified or
Reported. Unless the Reporting Spanish Financial Institution elects
otherwise, where the implementing rules in Spain provide for such an
election, Preexisting Entity Accounts with account balances that do not
exceed $250,000 as of December 31, 2013, are not required to be
reviewed, identified, or reported as U.S. Reportable Accounts until the
account balance exceeds $1,000,000.
B. Entity Accounts Subject to Review. Preexisting Entity Accounts
that have an account balance or value that exceeds $250,000 as of
December 31, 2013, and Preexisting Entity Accounts that initially do not
exceed $250,000 but the account balance of which later exceeds
$1,000,000 must be reviewed in accordance with the procedures set forth
in paragraph D of this section.
C. Entity Accounts With Respect to Which Reporting is Required.
With respect to Preexisting Entity Accounts described in paragraph B of
this section, only accounts that are held by one or more entities that are
Specified U.S. Persons, or by Passive NFFEs with one or more
Controlling Persons who are U.S. citizens or residents shall be treated as
U.S. Reportable Accounts. In addition, accounts held by
Nonparticipating Financial Institutions shall be treated as accounts for
which aggregate payments as described in paragraph 1(b) of Article 4 of
the Agreement are reported to the Spanish Competent Authority.
D. Review Procedures for Identifying Entity Accounts With
Respect to Which Reporting is Required. For Preexisting Entity
Accounts described in paragraph B of this section, the Reporting Spanish
Financial Institution must apply the following review procedures to
determine whether the account is held by one or more Specified U.S.
Persons, by Passive NFFEs with one or more Controlling Persons who
are U.S. citizens or residents, or by a Nonparticipating Financial
Institution:
1. Determine Whether the Entity is a Specified U.S. Person.
a) Review information maintained for regulatory or
customer relationship purposes (including information
collected pursuant to AML/KYC Procedures) to determine
whether the information indicates that the Entity Account
Holder is a U.S. Person. For this purpose, information
indicating that the entity is a U.S. Person includes a U.S.
place of incorporation or organization, or a U.S. address.
b) If the information indicates that the Entity Account
Holder is a U.S. Person, the Reporting Spanish Financial
Institution must treat the account as a U.S. Reportable
Account unless it obtains a self-certification from the
Account Holder (which may be on an IRS Form W-8 or W-
9, or a similar agreed form), or reasonably determines based
on information in its possession or that is publicly available,
that the Account Holder is not a Specified U.S. Person.
2. Determine Whether a Non-U.S. Entity is a Financial
Institution.
a) Review information maintained for regulatory or
customer relationship purposes (including information
collected pursuant to AML/KYC Procedures) to determine
whether the information indicates that the Entity Account
Holder is a Financial Institution.
b) If the information indicates that the Entity Account
Holder is a Financial Institution, then the account is not a
U.S. Reportable Account.
3. Determine Whether a Financial Institution is a
Nonparticipating Financial Institution Payments to Which Are
Subject to Aggregate Reporting Under Paragraph 1(b) of
Article 4 of the Agreement.
a) Subject to subparagraph (b) of this paragraph, if the
Account Holder is a Spanish Financial Institution or other
Partner Jurisdiction Financial Institution, then no further
review, identification, or reporting is required with respect to
the account.
b) A Spanish Financial Institution or other Partner
Jurisdiction Financial Institution shall be treated as a
Nonparticipating Financial Institution if it is identified as
such by the IRS pursuant to paragraph 2 of Article 5 of the
Agreement.
c) If the Account Holder, is not a Spanish Financial
Institution or other Partner Jurisdiction Financial Institution,
then the Reporting Spanish Financial Institution must treat
the entity as a Nonparticipating Financial Institution
payments to which are reportable under paragraph 1(b) of
Article 4 of the Agreement, unless the Reporting Spanish
Financial Institution:
(1) Obtains a self-certification (which may be on an
IRS Form W-8 or similar agreed form) from the entity
that it is a certified deemed-compliant FFI, an exempt
beneficial owner, or an excepted FFI, as those terms
are defined in relevant U.S. Treasury Regulations; or
(2) In the case of a participating FFI or registered
deemed-compliant FFI, verifies the entity’s FATCA
identifying number on a published IRS FFI list.
4. Determine Whether an Account Held by an NFFE Is a
U.S. Reportable Account. With respect to an Account Holder of a
Preexisting Entity Account that is not identified as either a U.S.
Person or a Financial Institution, the Reporting Spanish Financial
Institution must identify (i) whether the entity has Controlling
Persons, (ii) whether the entity is a Passive NFFE, and (iii) whether
any of the Controlling Persons of the entity is a citizen or resident
of the United States. In making these determinations the Reporting
Spanish Financial Institution should follow the guidance in sub-
paragraphs (a) through (d) of this paragraph in the order most
appropriate under the circumstances.
a) For purposes of determining the Controlling Persons
of an entity, a Reporting Spanish Financial Institution may
rely on information collected and maintained pursuant to
AML/KYC Procedures.
b) For purposes of determining whether the entity is a
Passive NFFE, the Reporting Spanish Financial Institution
must obtain a self-certification (which may be on an IRS
Form W-8 or W-9, or on a similar agreed form) from the
Account Holder to establish its status, unless it has
information in its possession or that is publicly available,
based on which it can reasonably determine that the entity is
an Active NFFE.
c) For purposes of determining whether a Controlling
Person of a Passive NFFE is a citizen or resident of the
United States for tax purposes, a Reporting Spanish
Financial Institution may rely on:
(1) Information collected and maintained pursuant
to AML/KYC Procedures in the case of a Preexisting
Entity Account held by one or more NFFEs with an
account balance that does not exceed $1,000,000; or
(2) A self-certification (which may be on an IRS
Form W-8 or W-9, or on a similar agreed form) from
the Account Holder or such Controlling Person in the
case of a Preexisting Entity Account held by one or
more NFFEs with an account balance that exceeds
$1,000,000.
d) If any Controlling Person of a Passive NFFE is a
citizen or resident of the United States, the account shall be
treated as a U.S. Reportable Account.
E. Timing of Review and Additional Procedures Applicable to
Preexisting Entity Accounts
1. Review of Preexisting Entity Accounts with an account
balance or value that exceeds $250,000 as of December 31, 2013,
must be completed by December 31, 2015.
2. Review of Preexisting Entity Accounts with a balance or
value that does not exceed $250,000 as of December 31, 2013, but
exceeds $1,000,000 as of December 31 of a subsequent year, must
be completed within six months after the end of the calendar year
in which the account balance exceeds $1,000,000.
3. If there is a change of circumstances with respect to a
Preexisting Entity Account that causes the Reporting Spanish
Financial Institution to know or have reason to know that the self-
certification or other documentation associated with an account is
incorrect or unreliable, the Reporting Spanish Financial Institution
must re-determine the status of the account in accordance with the
procedures set forth in paragraph D of this section.
V. New Entity Accounts. The following rules and procedures apply to
accounts held by entities and opened on or after January 1, 2014 (“New Entity
Accounts”).
A. The Reporting Spanish Financial Institution must determine
whether the Account Holder is: (i) a Specified U.S. Person; (ii) a Spanish
Financial Institution or other Partner Jurisdiction Financial Institution;
(iii) a participating FFI, a deemed-compliant FFI, an exempt beneficial
owner, or an excepted FFI, as those terms are defined in relevant U.S.
Treasury Regulations; or (iv) an Active NFFE or Passive NFFE.
B. A Reporting Spanish Financial Institution may determine that an
Account Holder is an Active NFFE, a Spanish Financial Institution, or
other Partner Jurisdiction Financial Institution if the Reporting Spanish
Financial Institution reasonably determines that the entity has such status
on the basis of information that is publicly available or in the possession
of the Reporting Spanish Financial Institution.
C. In all other cases, a Reporting Spanish Financial Institution must
obtain a self-certification from the Account Holder to establish the
Account Holder’s status.
1. If the Entity Account Holder is a Specified U.S. Person, the
Reporting Spanish Financial Institution must treat the account as a
U.S. Reportable Account.
2. If the Entity Account Holder is a Passive NFFE, the
Reporting Spanish Financial Institution must identify the
Controlling Persons as determined under AML/KYC Procedures,
and must determine whether any such person is a citizen or resident
of the United States on the basis of a self-certification from the
Account Holder or such person. If any such person is a citizen or
resident of the United States, the account shall be treated as a U.S.
Reportable Account.
3. If the Entity Account Holder is: (i) a U.S. Person that is not
a Specified U.S. Person; (ii) subject to subparagraph C (4) of this
section, a Spanish Financial Institution or other Partner Jurisdiction
Financial Institution; (iii) a participating FFI, a deemed-compliant
FFI, an exempt beneficial owner, or an excepted FFI, as those
terms are defined in relevant U.S. Treasury Regulations; (iv) an
Active NFFE; or (v) a Passive NFFE none of the Controlling
Persons of which is a U.S. citizen or resident, then the account is
not a U.S. Reportable Account and no reporting is required with
respect to the account.
4. If the Entity Account Holder is a Nonparticipating Financial
Institution (including a Spanish Financial Institution or other
Partner Jurisdiction Financial Institution that is identified by the
IRS as a Nonparticipating Financial Institution pursuant to
paragraph 2 of Article 5 of the Agreement), then the account is not
a U.S. Reportable Account, but payments to the Account Holder
must be reported as contemplated in paragraph 1(b) of Article 4 of
the Agreement.
VI. Special Rules and Definitions. The following additional rules and
definitions apply in implementing the due diligence procedures described
above:
A. Reliance on Self-Certifications and Documentary Evidence. A
Reporting Spanish Financial Institution may not rely on a self-
certification or documentary evidence if the Reporting Spanish Financial
Institution knows or has reason to know that the self-certification or
documentary evidence is incorrect or unreliable.
B. Definitions. The following definitions apply for purposes of this
Annex I.
1. AML/KYC Procedures. “AML/KYC Procedures” means the
customer due diligence procedures of a Reporting Spanish
Financial Institution pursuant to the anti-money laundering or
similar requirements of Spain to which such Reporting Spanish
Financial Institution is subject.
2. NFFE. An “NFFE” means any Non-U.S. Entity that is not an
FFI as defined in relevant U.S. Treasury Regulations, and also
includes any Non-U.S. Entity that is resident in Spain or other
Partner Jurisdiction and that is not a Financial Institution.
3. Passive NFFE. A “Passive NFFE” means any NFFE that is not
(i) an Active NFFE or (ii) a withholding foreign partnership or
withholding foreign trust pursuant to relevant U.S. Treasury
Regulations.
4. Active NFFE. An “Active NFFE” means any NFFE that meets
any of the following criteria:
a) Less than 50 percent of the NFFE’s gross income for the
preceding calendar year or other appropriate reporting
period is passive income and less than 50 percent of the
assets held by the NFFE during the preceding calendar
year or other appropriate reporting period are assets that
produce or are held for the production of passive income;
b) The stock of the NFFE is regularly traded on an
established securities market or the NFFE is a Related
Entity of an Entity the stock of which is traded on an
established securities market;
c) The NFFE is organized in a U.S. Territory and all of the
owners of the payee are bona fide residents of that U.S.
Territory;
d) The NFFE is a non-U.S. government, a government of a
U.S. Territory, an international organization, a non-U.S.
central bank of issue, or an Entity wholly owned by one
or more of the foregoing;
e) Substantially all of the activities of the NFFE consist of
holding (in whole or in part) the outstanding stock of, and
providing financing and services to, one or more
subsidiaries that engage in trades or businesses other than
the business of a Financial Institution, except that an
NFFE shall not qualify for this status if the NFFE
functions (or holds itself out) as an investment fund, such
as a private equity fund, venture capital fund, leveraged
buyout fund or any investment vehicle whose purpose is
to acquire or fund companies and then hold interests in
those companies as capital assets for investment
purposes;
f) The NFFE is not yet operating a business and has no
prior operating history, but is investing capital into assets
with the intent to operate a business other than that of a
Financial Institution; provided, that the NFFE shall not
qualify for this exception after the date that is 24 months
after the date of the initial organization of the NFFE;
g) The NFFE was not a Financial Institution in the past five
years, and is in the process of liquidating its assets or is
reorganizing with the intent to continue or recommence
operations in a business other than that of a Financial
Institution;
h) The NFFE primarily engages in financing and hedging
transactions with or for Related Entities that are not
Financial Institutions, and does not provide financing or
hedging services to any Entity that is not a Related
Entity, provided that the group of any such Related
Entities is primarily engaged in a business other than that
of a Financial Institution; or
i) The NFFE meets all of the following requirements:
i. It is established and maintained in its country of
residence exclusively for religious, charitable,
scientific, artistic, cultural, or educational purposes;
ii. It is exempt from income tax in its country of
residence;
iii. It has no shareholders or members who have a
proprietary or beneficial interest in its income or
assets;
iv. The applicable laws of the Entity’s country of
residence or the Entity’s formation documents do not
permit any income or assets of the Entity to be
distributed to, or applied for the benefit of, a private
person or non-charitable Entity other than pursuant
to the conduct of the Entity’s charitable activities, or
as payment of reasonable compensation for services
rendered, or as payment representing the fair market
value of property which the Entity has purchased;
and
v. The applicable laws of the Entity’s country of
residence or the Entity’s formation documents
require that, upon the Entity’s liquidation or
dissolution, all of its assets be distributed to a
governmental Entity or other non-profit
organization, or escheat to the government of the
Entity’s country of residence or any political
subdivision thereof.
C. Account Balance Aggregation and Currency Translation Rules
1. Aggregation of Individual Accounts. For purposes of
determining the aggregate balance or value of accounts held by an
individual, a Reporting Spanish Financial Institution shall be
required to aggregate all accounts maintained by the Reporting
Spanish Financial Institution, or Related Entities, but only to the
extent that the Reporting Spanish Financial Institution’s
computerized systems link the accounts by reference to a data
element such as client number or taxpayer identification number,
and allow account balances to be aggregated. Each holder of a
jointly held account shall be attributed the entire balance or value
of the jointly held account for purposes of applying the aggregation
requirements described in this paragraph.
2. Aggregation of Entity Accounts. For purposes of
determining the aggregate balance or value of accounts held by an
Entity, a Reporting Spanish Financial Institution shall be required
to take into account all accounts held by Entities that are
maintained by the Reporting Spanish Financial Institution, or
Related Entities, to the extent that the Reporting Spanish Financial
Institution’s computerized systems link the accounts by reference
to a data element such as client number or taxpayer identification
number and allow account balances to be aggregated.
3. Special Aggregation Rule Applicable to Relationship
Managers. For purposes of determining the aggregate balance or
value of accounts held by a person to determine whether an
account is a High Value Account, a Reporting Spanish Financial
Institution shall also be required, in the case of any accounts that a
relationship manager knows or has reason to know are directly or
indirectly owned, controlled, or established (other than in a
fiduciary capacity) by the same person, to aggregate all such
accounts.
4. Currency Translation Rule. For purposes of determining
the balance or value of accounts denominated in a currency other
than the U.S. dollar, a Reporting Spanish Financial Institution must
convert the dollar threshold amounts described in this Annex I into
such currency using a published spot rate determined as of the last
day of the calendar year preceding the year in which the Reporting
Spanish Financial Institution is determining the balance or value.
D. Documentary Evidence. For purposes of this Annex I, acceptable
documentary evidence includes any of the following:
1. A certificate of residence issued by an appropriate tax
official of the country in which the payee claims to be a resident.
2. With respect to an individual, any valid identification issued
by an authorized government body (for example, a government or
agency thereof, or a municipality), that includes the individual’s
name and is typically used for identification purposes.
3. With respect to an Entity, any official documentation issued
by an authorized government body (for example, a government or
agency thereof, or a municipality) that includes the name of the
Entity and either the address of its principal office in the country
(or U.S. Territory) in which it claims to be a resident or the country
(or U.S. Territory) in which the Entity was incorporated or
organized.
4. With respect to an account maintained in a jurisdiction with
anti-money laundering rules that have been approved by the IRS in
connection with a QI agreement (as described in relevant U.S.
Treasury Regulations), any of the documents other than a Form W-
8 or W-9 referenced in the jurisdiction’s attachment to the QI
agreement for identifying individuals or entities.
5. Any financial statement, third-party credit report, bankruptcy
filing, or U.S. Securities and Exchange Commission report.
ANNEX II
NON-REPORTING SPANISH FINANCIAL INSTITUTIONS
AND PRODUCTS
This Annex II may be updated by a mutual agreement entered into between the
Competent Authorities of Spain and the United States: (1) to include additional
entities, accounts, and products that present a low risk of being used by U.S.
Persons to evade U.S. tax and that have similar characteristics to the entities,
accounts, and products identified in this Annex II as of the date of entry into
force of the Agreement; or (2) to remove entities, accounts, and products that,
due to changes in circumstances, no longer present a low risk of being used by
U.S. Persons to evade U.S. tax. Procedures for reaching such a mutual
agreement may be included in the mutual agreement described in paragraph 6 of
Article 3 of the Agreement.
I. Exempt Beneficial Owners. The following categories of institutions are
Non-Reporting Spanish Financial Institutions that are treated as exempt
beneficial owners for purposes of section 1471 of the U.S. Internal Revenue
Code:
A. Governmental Entities
Instituto de Crédito Oficial
Consorcio de Compensación de Seguros
Comisión Nacional del Mercado de Valores
B. Central Bank
Banco de España
C. Retirement Funds
1. Any fund regulated under the Amended Text of the Law on
pension funds and pension schemes (Texto refundido de la Ley
sobre fondos y planes de pensiones), passed by Legislative Royal
Decree 1/2002 of 29th November.
2. Any entity defined under Article 64 of the Amended Text of the
Law on the regulation and monitoring of private insurances (Texto
refundido de la Ley de ordenación y supervisión de los seguros
privados) passed by Legislative Royal Decree 6/2004 of 29th
October, provided that in the case of mutual funds all participants
are employees; promoters and sponsoring partners are the
companies, institutions or individual entrepreneurs to which the
employees are engaged; and benefits are exclusively derived from
the social welfare agreement between both parties, as well as any
other comparable entity to them regulated within the scope of the
political subdivisions (Comunidades Autónomas).
II. Deemed-Compliant Financial Institutions.
A. The following categories of institutions are Non-Reporting Spanish
Financial Institutions that are treated as deemed-compliant FFIs for
purposes of section 1471 of the U.S. Internal Revenue Code:
1. Small Financial Institutions with Local Client Base
A Spanish Financial Institution that meets all of the following
requirements:
a. The Financial Institution must be licensed and regulated
under the laws of Spain;
b. The Financial Institution must have no fixed place of
business outside Spain;
c. The Financial Institution must not solicit Account
Holders outside Spain. For this purpose, a Financial
Institution shall not be considered to have solicited Account
Holders outside of Spain merely because it operates a
website, provided that the website does not specifically
indicate that the Financial Institution provides accounts or
services to nonresidents or otherwise target or solicit U.S.
customers;
d. The Financial Institution must be required under the tax
laws of Spain to perform either information reporting or
withholding of tax with respect to accounts held by residents
of Spain;
e. At least 98 percent of the accounts by value provided by
the Financial Institution must be held by residents (including
residents that are entities) of Spain or another Member State
of the European Union;
f. Subject to subparagraph 1(g), below, beginning on
January 1, 2014, the Financial Institution does not provide
accounts to (i) any Specified U.S. Person who is not a
resident of Spain (including a U.S. Person that was a
resident of Spain when the account was opened but
subsequently ceases to be a resident of Spain), (ii) a
Nonparticipating Financial Institution, or (iii) any Passive
NFFE with Controlling Persons who are U.S. citizens or
residents;
g. On or before January 1, 2014, the Financial Institution
must implement policies and procedures to monitor whether
it provides any account held by a person described in
subparagraph 1(f), and if such an account is discovered, the
Financial Institution must report such account as though the
Financial Institution were a Reporting Spanish Financial
Institution or close such account;
h. With respect to each account that is held by an individual
who is not a resident of Spain or by an entity, and that is
opened prior to the date that the Financial Institution
implements the policies and procedures described in
subparagraph 1(g), above, the Financial Institution must
review those accounts in accordance with the procedures
described in Annex I applicable to Preexisting Accounts to
identify any U.S. Reportable Account or account held by a
Nonparticipating Financial Institution, and must close any
such accounts that were identified, or report on such
accounts as though the Financial Institution were a
Reporting Spanish Financial Institution;
i. Each Related Entity of the Financial Institution must be
incorporated or organized in Spain and must meet the
requirements set forth in this paragraph; and
j. The Financial Institution must not have policies or
practices that discriminate against opening or maintaining
accounts for individuals who are Specified U.S. Persons and
who are residents of Spain.
B. Certain Collective Investment Vehicles
In the case of an Investment Entity that is a collective investment vehicle
regulated under the laws of Spain:
a) if all of the interests in the collective investment vehicle
(including debt interests in excess of $50,000) are held by or
through one or more Financial Institutions that are not
Nonparticipating Financial Institutions, such collective investment
vehicle will be treated as a deemed-compliant FFI for purposes of
section 1471 of the U.S. Internal Revenue Code, and the reporting
obligations of any Investment Entity (other than a Financial
Institution through which interests in the collective investment
vehicle are held) will be deemed fulfilled with respect to interests
in the collective investment vehicle; or
b) if the collective investment vehicle is not described in
paragraph (a), consistent with paragraph 3 of Article 5 of the
Agreement, if the information required to be reported by the
collective investment vehicle under the Agreement with respect to
interests in the collective investment vehicle is reported by the
collective investment vehicle or another Investment Entity, the
reporting obligations of all other Investment Entities required to
report with respect to the interests in the collective investment
vehicle will be deemed fulfilled with respect to such interests.
III. Exempt Products. The following categories of accounts and products
established in Spain and maintained by a Spanish Financial Institution shall not
be treated as Financial Accounts, and therefore shall not be U.S. Reportable
Accounts or accounts held by a Nonparticipating Financial Institution, under the
Agreement:
A. Certain Retirement Accounts or Products
1. Annuity contracts which substantiate commitments on pensions
under First Additional Provision of the Amended Text of the Law
on pension funds and pension schemes (Legislative Royal Decree
1/2002 of 29th November), provided that the benefit amount is
established pursuant to a collective bargaining agreement between
employers and the representatives of a trade union or set out by
Law.
2. Accounts held by pension plans described in section I.C.
3. Accounts held by mutualidades de previsión social
4. Planes de previsión asegurados
5. Planes de previsión social empresarial
6. Seguros de dependencia
B. Certain Other Tax-Favored Accounts or Products
1. Plan individual de ahorro sistemático
