FATCA – Background, goals and impacts of the new regulations

The U.S. Act, which is aimed at combating tax evasion “Foreign Account Tax Compliance Act”, abbreviated FATCA, is intended to counter the trend of tax evasion in relation to foreign accounts of U.S. citizens and at the same time increase tax revenue. For this purpose, Germany, France, United Kingdom, Italy and Spain, among other countries, have each entered into an intergovernmental agreement with the USA since 2012.

In accordance with the new regulations, German financial institutions are required to transfer information relating to their U.S. account and custodial account holders to the U.S. tax authorities (Internal Revenue Service, IRS) via the Federal Central Tax Office (Bundeszentralamt für Steuern, BZSt).