U.S. and French officials signed an intergovernmental agreement Thursday to advance the implementation of the Foreign Accounting Tax Compliance Act.

FATCA, which was included as part of the HIRE Act of 2010, requires foreign financial institutions, including hedge funds, to report on the holdings of U.S. taxpayers to the Internal Revenue Service, or else face stiff penalties. The law has provoked controversy both in the U.S. and abroad, with some foreign governments and banks complaining that the law violates banking confidentiality laws, and with U.S. expatriates and dual citizens finding themselves owing taxes to the U.S. government that they never had to pay before.

To help address some of the concerns, the Treasury Department has been negotiating a series of intergovernmental agreements with foreign governments, under the authority of their existing tax treaties, while also delaying some of the provisions. The agreement with the French government is the latest such deal in the U.S. efforts to combat offshore tax evasion.

“France is a welcome addition to the list of countries that have formally signed a Model 1 Intergovernmental Agreement with the U.S.,” said Denise M Hintzke, global tax leader at Deloitte Tax LLP’s Foreign Account Tax Compliance Initiative. “I just returned from Paris and the signing of this agreement has been especially anticipated by the fund industry there. The IGA and the implementing guidance which will follow should finally give financial institutions in France a clearer idea of what they need to do to be in compliance.”

It is the 10th intergovernmental agreement, or IGA, signed to date.

“France has been an enthusiastic supporter of our effort to promote global tax transparency and critical to drafting a model of FATCA implementation,” said Deputy Assistant Secretary for International Tax Affairs Robert B. Stack in a statement. “This agreement demonstrates the growing global momentum behind FATCA and strong support from the world’s most important economies.”

France was one of the first countries to champion the underlying goals of FATCA and its intergovernmental approach in 2012, according to the Treasury Department, signing a joint statement with Germany, Italy, Spain, the United Kingdom and the U.S. The new agreement was signed Thursday by U.S. Ambassador to France Charles H. Rivkin and French Finance Minister Pierre Moscovici.

“The signing of this agreement marks an important step forward in the collaboration between the United States and France to combat tax evasion,” said Rivkin.

Under the provisions of FATCA, U.S.-based financial institutions are required to withhold a portion of payments made to foreign financial institutions, or FFIs, that do not agree to identify and report information on U.S. account holders. FFIs have the option of entering into agreements directly with the IRS, or through one of two alternative Model IGAs signed by their home country. The IGA between the United States and France is the Model 1A version, meaning that FFIs in France will be required to report tax information about U.S. account holders directly to the French government, which will in turn relay that information to the IRS. The IRS plans to reciprocate with similar information about French account holders.

In addition to the 10 FATCA IGAs that have been signed to date with Denmark, France, Germany, Ireland, Japan, Mexico, Norway, Spain, Switzerland and the United Kingdom, the Treasury Department has also reached 16 agreements in substance and is engaged in related conversations with many more jurisdictions. For the signed IGA with the French Republic, click here. For updates and further information on the IRS FATCA page, click here.

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