Foreign Account Tax Compliance Act (FATCA)

In 2010 the USA passed the Foreign Account Tax Compliance Act (FATCA).  FATCA came into force as a component of the “Hiring Incentives to Restore Employment Act” (HIRE Act). The aim of this HIRE Act is to create jobs in America and offer companies an incentive to employ job seekers. In order to be able offer such sweeteners to the companies, America conversely needs to ensure that it can finance them through taxes. This has brought potential tax evasion by companies operated overseas into sharper focus, and the US tax authorities have taken financial institutions around the world to task.

Germany advocates the idea of combatting tax evasion, hence its willingness to implement FATCA at an early stage. However, in order to enable a statutorily-compliant implementation of FATCA in Germany, a bilateral agreement on FACTA was negotiated between the USA and Germany and published in May 2013.

FATCA became a statutory requirement for companies based in Germany following the conclusion of the German-American treaty.

The Global Intermediary Identification Number (GIIN) identifies financial institutions to the American tax authority (IRS). After a financial institution has been registered on the IRS website and vetted, a GIIN will be issued. The GIIN shows other financial institutions that the partner bank is FATCA-compliant.

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