The Foreign Account Tax Compliance Act (FATCA) is a United States federal law that was passed in 2010 in order to combat tax evasion by US taxpayers through the use of offshore accounts. As part of FATCA, the US government requires foreign financial institutions (FFIs) to report certain information about their US account holders to the Internal Revenue Service (IRS). Many countries, including Germany, have signed a FATCA agreement with the US government in order to comply with this law.
The FATCA agreement between Germany and the US was signed in 2013 and came into effect on July 22, 2014. Under the agreement, German FFIs are required to identify and report information about their US account holders to the German Federal Central Tax Office (Bundeszentralamt für Steuern). This information is then passed on to the IRS.
German FFIs must register with the IRS in order to comply with FATCA. They must also collect certain information from their US account holders, including their name, address, taxpayer identification number, and account balance. This information must be reported to the IRS annually.
The FATCA agreement between Germany and the US has caused some controversy in Germany, with some critics arguing that it violates German privacy laws. However, the German government has defended the agreement, stating that it is necessary in order to combat tax evasion.
If you are a US taxpayer with offshore accounts in Germany, it is important to be aware of the FATCA agreement and ensure that your German FFI is compliant with the law. Failure to comply with FATCA can result in significant penalties.
In conclusion, the FATCA agreement between Germany and the US is an important tool in the fight against tax evasion. While it has caused some controversy, it is necessary for German FFIs to comply with the law in order to avoid penalties. US taxpayers with offshore accounts in Germany should work with their German FFI to ensure compliance with FATCA.