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FATCA (Exchange of Information with the USA)

New rules for the automatic exchange of information on capital income with the USA

FATCA is the abbreviation for a 2010 US-law, which has put an obligation on foreign financial institutions globally to report information to the US Internal Revenue Service (IRS) (”Foreign Account Tax Compliance Act”).

Facts about FATCA (Exchange of information with the USA)

Important: Since 2012, FATCA is no longer an one-way reporting system but serves the mutual exchange of information with the USA. Previous reports by the press are therefore obsolete. This means, that the USA also reports information about financial accounts to other countries, subject to a FATCA-treaty with the USA being in place. Germany has entered into such a treaty.

1. What is the purpose of FATCA?

2. Measures under FATCA

3. Which countries participate?

Treaty USA-Germany

Under the treaty USA/Germany, information is to be exchanged for periods from 2014 onwards. Enforcement is expected to commence in 2015. The treaty does not replace existing regulation, but supplements the existing double tax treaty between the USA and Germany (DTT USA). Germany implemented FATCA by the law on the adjustment of the investment tax law.

In Germany, the implementation directive for FATCA (FACTCA-USA-UmsV) regulates the collection of the required data by the financial institutions and their method of transmission.

  • German financial institutions are obligated to register with the federal tax authority in the USA (Internal Revenue Service, IRS) and report the data pertaining to reportable accounts to the German Central Tax Authority (BZSt).
  • The BZSt forwards the reported information to the IRS.
  • Vice versa, the data received from the IRS is referred to the responsible Tax Authority by the BZSt.

Great Britain was the first country to sign the treaty with the USA.

By now, more than 20 countries have entered into respective treaties with the USA. A further 30 countries are currently negotiating the introduction of FATCA with the USA.

LHP: Attorneys at Law, Tax Law Specialists, Tax Advisers PartmbB

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