But what is this exactly?

No, not exactly.

FATCA is actually a US law and means "Foreign Account Tax Compliance Act."

It's really not as complicated as it seems.

Basically just like many other countries, the USA is dealing with a huge budget deficit.

That's why the USA needs money.

And what are the possible sources of a income for a country like this?

That's right.

One possibility is through taxes.

In the past, the USA didn't take full advantage of this possibility.

After all, every US citizen who lives abroad actually has to pay taxes in the USA,

but only a few really do so.

This means the United States are losing a lot of money.

That's why the US government passed the new FATCA law.

Foreign banks such as banks in Germany

are now supposed to identify which of their customers are US citizens,

private customers as well as corporate customers.

Even all shareholders who are US citizens

and hold more than 25 percent of a company are affected.

The banks then send this select information about their American customers to the

German Federal Tax Office

in compliance with standards set forth in German data protection laws.

This central federal office collects the information from every bank,

pulls it and sends this on to the IRS, the American tax authority.

This sounds like a lot of work.

Why actually?

Why should people in Germany care about the tax laws in the USA?

Can't we just ignore them?

Well, we could if there wasn't this little addendum to the FATCA law.

Every bank that does not cooperate will automatically be charged

a 30 percent penalty on all yields in the USA.

This doesn't only affect the bank,

but also the bank's customers, the Germans as well as the Americans.

A regular transfer from your great aunt in California, yields on Apple shares

or interest on US government bonds, only seventy percent would ever be credited.

The HypoVereinsbank is avoiding these penalties for the bank and its customers

and is compliant with FATCA.

In this way, we get 100 percent of our US yields

and the USA is able to take in tax income for its citizens abroad.