Foreign Account Tax Compliance Act

FATCA stands for " Foreign Account Tax Compliance Act " and is the short name for a part of a law that entered into force in 2010 U.S. law, the U.S. tax reporting of foreign financial institutions has been significantly tightened.

Goal of FATCA is to prevent that in the U.S. taxpayer money to create in foreign tax havens (see also bank secrecy). After the introduction of FATCA some large European banks such as UBS, ING or the German Bank concluded selected trading departments in the U.S., which served as a bridge until then to create money to Europe.

History

FATCA was set on March 18, 2010 in the U.S. under the " Hiring Incentives to Restore Employment Act " ( HIRE Act ) came into force. The first version of the implementation policy of the U.S. tax authority, the Internal Revenue Service ( IRS) for this purpose has been published with the Notice 2010-60 in September 2010. The IRS published in April 2011, Notice 2011-34, Notice 2011-53 in July 2011 and in February 2012, the Proposed Regulations.

In July 2012, the United States announced together with the countries Germany, France, Great Britain, Italy and Spain, FATCA in these so-called " FATCA partner countries " to implement on the basis of bilateral agreements. It presented the States before a model agreement. Great Britain signed it the first country in September 2012.

The IRS published in January 2013, the "Final Regulations" for non- FATCA partner countries.

Background

With FATCA is to prevent that U.S. taxable persons in particular by means of properties under international financial institutions or other non-US legal entities reduce their taxes. This is to be achieved mainly through an extension of reporting obligations (reporting):

  • Financial institutions must complete an additional agreement with the IRS.
  • Everyone, including non-US customers outside the U.S. must be clearly identified in terms of their U.S. tax liability. In particular, those U.S. persons are to realize the Shareholders of companies and partnerships are (if they are primarily investing works, so passive enterprises, by FATCA: passive NFFE = non financial foreign entity ).
  • Even the suspicion that a German could be a "U.S. Person " shall undertake financial institutions to investigate the evidence of a U.S. tax liability and to clarify this.
  • It must now be reported annually to the IRS and deposit accounts and non -exchange traded investments in the capital or liabilities.
  • The concept of income that must be reported, has been greatly expanded.
  • Credits, debits and highs in the accounts must be reported.

It is made a withholding tax of 30 % on all income from U.S. source ( " withholdable payments " ) for non-cooperating clients and financial institutions. But the primary goal is the identification and reporting of U.S. taxpayers.

The withholding tax does not final in nature and does not replace the issuance of the annual FATCA message.

Currently being discussed bilaterally between Germany and the U.S., the introduction of FATCA. On 8 February 2012, the U.S. has issued with the Federal Republic of Germany and other countries, a Joint Declaration on an intergovernmental approach to improving tax compliance in cross-border area and the implementation of the Foreign Account Tax Compliance Act ( FATCA ): Then

  • Does not have to enter into an agreement with the IRS by any financial institution
  • Waive the United States if necessary to the withholding tax
  • Only need to be sent to German authorities, the relevant data, which it then forwards it to the U.S. Agency
  • Germany has to issue further regulations relating to FATCA.
  • The U.S. undertakes the respective contractual partner to provide information on interest and dividend income available, which raises the U.S. tax authority of U.S. financial institutions.

On the EU Commission level (as of February 2012) is also sought a European solution. On 21 February 2013, the United States and the Federal Republic of Germany have initialed an agreement to increase tax compliance in cross -border situations.

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