FATCA: Foreign Account Compliance Act and American expats in Mexico

By Expat News

On November 19, 2012 the Treasury announced that the USA and Mexico signed a FATCA agreement. We earlier discussed what is FATCA. This IGA has a profound impact due to a substantial number of US-Mexican citizens living in the USA and American expats in Mexico. This FATCA agreement is based on the reciprocal Model I approach to implement the Foreign Account Compliance Act.


This is the third FATCA agreement signed in 2012. On September 12, 2012 the USA signed the intergovernmental agreement (IGA) with the United Kingdom. On November 15, 2012 another IGA was signed with Denmark.

Let’s review some major points of this Foreign Account Compliance Act that American expats in Mexico must consider.

When will this FATCA agreement come into effect?

The effective date for this IGA is January 1, 2013.

Which financial institutions are exempt under this IGA?

Per Annex II of this FATCA agreement there are several types of institutions and products that get a preferential treatment: exempt beneficial owners, deemed –compliant financial institutions and exempt products.

Exempt beneficial owners include:

  • Mexican government and its political subdivisions
  • Any owned agency of five governmental entities
  • El Banco de México and its subsidiaries
  • Insurance institutions for pension and survival per article 159, Fraction IV of Mexico’s Social Security Law

A list of deemed-compliant financial institutions includes any exempt organizations per article 22 of the Mexico-US tax treaty, some Mexican trusts (fideicomisos) and collective investment vehicles regulated under Mexican laws.

Only some Mexican personal retirement funds, pension funds etc are considered exempt under this Mexico-US Foreign Account Compliance Act.

This FATCA agreement is flexible in nature. Article 8 affirms that negotiations will be extended if any difficulties arise during the implementation process.

American expats in Mexico must remember that there are different FATCA filing threshold requirements for expats who reside outside in the USA vs in the USA. FATCA has a lot of duplication with FBARs but the forms are different.


American expats in Mexico who need guidance with new FATCA requirements must contact a US expatriate tax professional that provides international tax services. International tax experts will assist you with FATCA and expatriate tax return issues.