FATCA (Foreign Account Tax Compliance Act)
FATCA is a US law requiring foreign financial institutions, including certain life insurers, to report accounts held by US taxpayers.
Concept
FATCA (Foreign Account Tax Compliance Act) is a US federal law enacted in 2010 that requires foreign financial institutions worldwide to report accounts and investments held by US taxpayers to the US tax authority (IRS), in order to combat tax evasion through assets held abroad by US persons.
Scope of Application for Insurers
Alongside banks, FATCA also covers certain insurance companies, particularly life and annuity insurers whose products have a cash surrender value or an investment component (such as unit-linked life and annuity insurance); pure risk insurance without a savings component is generally not affected by FATCA.
Implementation through Intergovernmental Agreements
For the practical implementation of FATCA, numerous countries, including Germany and other EU member states, have concluded intergovernmental agreements (IGAs) with the US that govern the automatic exchange of information through the respective national tax authorities, allowing affected insurers to meet their reporting obligations through the domestic tax administration rather than directly to the IRS.