The Federal Republic of Germany, the Republic of Austria and Finland reached an agreement with the United States of America on the mutual exchange of tax-relevant information to combat tax evasion in the agreement implementing the Foreign Account Tax Compliance Act (FATCA) from 31 March 2015. In the FACTA agreement, Germany assured the USA that it would oblige financial institutions domiciled in Germany to collect certain information on their clients or investors and to transmit the data thus collected to the U.S. tax authorities (IRS).
When is a person subject to U.S. tax?
A person is subject to U.S. tax if at least one of the following characteristics applies:
Place of birth in the U.S.
Dual citizenship of the U.S. and another country
U.S. tax resident (residing at least 183 days per year)
U.S. tax number (SSN or TIN)
Are companies or corporations also affected by the audit?
Not only individuals, but also accounts and custody accounts of certain companies and enterprises are impacted. If a U.S. taxable person directly or indirectly hold an interest of at least 25 % in a non-US company or control it and the majority of the company's income is derived from financial investments, the account of this company is considered a U.S. account. In this case, the account plus the U.S. taxable person is reported to the IRS. U.S. companies that have their registered office or management in the USA are generally reported.