Foreign Account Tax Compliance Act (FATCA) – UPDATE

As mentioned on our blog various times before, FATCA is an intergovernmental agreement, as a part of the “Hiring Incentives to Restore Employment Act“ (HIRE Act 2010) between Germany -and others- and the United States. It requires individuals to report their financial accounts held outside of the U.S. and foreign financial institutions to report to the IRS about American clients.

Due to the fact that Germany’s lower house (Bundestag) founded a “Grand Coalition” between the two leading parties (CDU/ CSU and SPD), they formed a coalition agreement, which states that they want to develop and adjust the currently existing modern and competitive tax law. The key aspect on this part of the agreement are the tax simplification and enforcement, containment of tax evasion and avoidance. The coalition also considered other additional tax issues.

In November 2013, the German upper house (Bundesrat) approved the draft of the Bundestag on the AIFM Taxation Adjustment Act (AIFM Steueranpassungsgesetz). This Act in particular introduces the statutory provisions to support the implementation of the FATCA Agreement as well as future similar bilateral agreements with other countries based on the exchange of tax information. The AIFM Taxation Adjustment Act was passed in December 2013 and entered into force on December 24th, 2013.  

The Act on implementation of FATCA was already promulgated in the Federal Law Gazette, namely the “German Tax Monthly”, on October 15th, 2013. The FATCA Agreement will be based on the authorization of §117c AO. To enforce this Act, however, Germany has to clarify its internal procedures and completely integrate this agreement into their national law. The U.S. is therefore, awaiting the written notification about these transposition.

The reports in respect of the years 2013 and 2014 are required by the IRS by the end of September 2015.

Best regards
und viele Grüße aus Charlotte
Reinhard von Hennigs