The U.S. Treasury Department and the Internal Revenue Service said Wednesday that the governments of the U.S. and Denmark have reached a bilateral agreement to implement the Foreign Account Tax Compliance Act to improve international tax compliance.

FATCA, which was included as part of the HIRE Act of 2010, requires foreign financial institutions, including hedge funds, to disclose the assets of U.S. taxpayers to the IRS. To help encourage foreign banks to implement the controversial provisions of the law, the U.S. has been negotiating agreements with foreign governments to provide information on their citizens to their tax authorities as well. So far, the U.S. has negotiated model agreements with five other countries—the United Kingdom, France, Germany, Italy and Spain—and signed a deal with the United Kingdom. Denmark is now the latest country to reach an accord on FATCA with the U.S.

Earlier this month, the Treasury Department said that it is engaging in talks with more than 50 countries and jurisdictions across the globe on FATCA compliance, including Denmark (see U.S. in Talks with 50+ Nations on FATCA Enforcement). Last Wednesday, the Treasury Department published a second model intergovernmental agreement, known as Model 2, for implementing FATCA, following the publication of the original model agreement with the five previously announced countries.

“As expected, the Model II IGA will require Foreign financial institutions to enter into agreements with, and report directly to, the IRS,” said Denise Hintzke, leader of Deloitte Tax LLP’s Global Foreign Account Tax Compliance Initiative, in a statement. “Model II is essentially a combination of Swiss/Japanese agreements issued earlier this year. The definitions are consistent with Model I, including the definition of an FFI. One major difference between Models I & II is that Model I, did not require FFIs to enter into an agreement with US government. Rather, FFIs would be governed by local law and the required reporting would be done through their own government. However, Model II states that FFIs must register with the U.S. Internal Revenue Service by Jan. 1, 2014, and comply with the terms of the FFI agreement – including due diligence, withholding and reporting requirements.

“In addition, the reporting in Model II requires FFIs to contact U.S. citizens with pre-existing accounts and obtain a consent to report and inform the Account Holder in writing that, if the U.S. TIN and consent are not given, (1) aggregate information about the account shall be reported to the IRS, (2) information about the account may give rise to a group request by the IRS for specific information about the account, (3) in such case, the account information shall be transmitted to the local tax administration, and (4) the local tax administration may exchange this information with the IRS in accordance,” Hintze noted. “If accountholder consent is not given, the FFI is required to report that consent was refused to the IRS. In the case of new accounts, consent to report must be given, or the account cannot be opened.”