What is FKAustG? The Financial Account Information Exchange Act

Everything you need to know about the FKAustG - Financial Account Information Exchange Act

The Financial Account Information Exchange Act, or FKAustG for short, is an important instrument in the fight against international tax evasion. In this comprehensive article, you will learn everything you need to know about this important law, how it works and its impact on taxpayers and financial institutions.

What is the FKAustG and what is it for?

The Financial Account Information Exchange Act (FKAustG) is a German law that regulates the automatic exchange of information on financial accounts in tax matters. It was introduced with the aim of effectively combating tax evasion and tax avoidance at an international level.

The FKAustG obliges German financial institutions to collect and report comprehensive data on the accounts of persons who are liable to pay tax in participating countries. This information is then exchanged between the tax authorities of the participating countries.

Legal basis and introduction

The FKAustG came into force on January 1, 2016 and implements the EU Administrative Assistance Directive as well as the OECD developed Common Reporting Standard (CRS) into German law. It forms the legal basis for the automatic exchange of information in Germany and is closely linked to the international CRS standard.

How does the FKAustG work?

The functioning of the FKAustG can be divided into several steps:

1. Data collectionGerman financial institutions collect relevant information on account holders who are liable to pay tax in participating countries.
2. Notification to the Federal Central Tax OfficeThe financial institutions transmit this data annually to the Federal Central Tax Office by July 31.
3. International data exchangeThe Federal Central Tax Office will exchange this information with the competent authorities of the participating countries by September 30.
4. Review by tax authoritiesThe receiving tax authorities use the data to check the tax returns of their citizens and detect possible discrepancies.

Participating countries and international cooperation

Over 110 countries participate in the automatic exchange of information under the FCAustG. These include:

• All EU member states
• Many other European countries
• Numerous non-European countries

It is important to note that the list of participating countries is dynamic and may change annually. The Federal Central Tax Office publishes regularly updated lists of CRS partner countries.

The United States of America is a notable exception. It is the only major industrialized country that does not participate in the CRS and therefore also not in the FCAustG. Instead, the USA has its own system called the "Foreign Account Tax Compliance Act" (FATCA) is implemented.

Obligations for financial institutions

The FKAustG imposes extensive obligations on financial institutions:

1. Identification of reportable accountsFinancial institutions must identify accounts that are subject to the reporting obligation.
2. Data collectionYou need to collect relevant information about account holders and accounts.
3. Annual reportThe collected data must be transmitted to the Federal Central Tax Office by July 31 of each year.
4. Duties of careFor existing accounts, financial institutions must check for indications of a foreign tax liability.
5. New account holder: Since 2016, new account holders have been required to submit a self-declaration of their tax residency.

Effects on account holders

The FKAustG has several consequences for account holders:

1. Increased transparencyFinancial information is exchanged internationally, which limits the opportunities for tax evasion.
2. Self-disclosure obligationNew account holders must disclose their tax residency.
3. Data protectionAlthough personal financial data is exchanged, it is subject to strict data protection regulations.
4. Potential additional tax payments: Previously undeclared foreign income may be subject to back taxes and penalties.

FKAustG vs. CRS: The differences

Although FKAustG and CRS are closely related, there are some significant differences:

1. Legal framework:
   • FKAustG: German law
   • CRS: International standard of the OECD
2. Area of application:
   • FKAustG: Specific for Germany
   • CRS: Used by over 100 countries
3. Function:
   • FKAustG: Transposes the CRS into German law
   • CRS: Forms the international basis for the exchange of information

The FKAustG can be understood as the concrete implementation and adaptation of the CRS to the German legal framework.

This could be of interest:

• 9 Non-CRS countries 2024 with banking secrecy, countries not participating in the CRS
• Which countries participate in the CRS (Global Bank Data Exchange)?

Sanctions for violations

Sanctions are provided for to ensure compliance with the FKAustG:

• Violations of the reporting and due diligence obligations can be classified as an administrative offense.
• Fines of up to 50,000 euros may be imposed.

These sanctions are intended to encourage financial institutions to conscientiously fulfill their obligations under the FKAustG.

Criticism and controversy

Despite its importance for international tax transparency, the FKAustG is also subject to criticism:

1. Data protection concernsThe extensive exchange of personal financial data raises questions about data protection.
2. Unequal participationThe non-participation of the USA in the CRS is often seen as problematic.
3. Bureaucratic effortFinancial institutions complain about the increased administrative effort required to fulfill the FKAustG requirements.
4. Effectiveness: There is debate as to whether the law is actually effective in combating tax evasion.

Conclusion and outlook

The FKAustG represents a significant step towards global tax transparency. It makes a significant contribution to making tax evasion more difficult and promoting fair tax practices. At the same time, it presents financial institutions with new challenges and raises important questions about data protection.

The number of participating countries is expected to increase further in the future. Further development and refinement of the regulations is also likely in order to respond to new challenges and technological developments.

It remains important for taxpayers and financial institutions to keep a close eye on developments in the area of international information exchange and to comply with the applicable regulations.

FAQ on the FKAustG

Here you will find answers to frequently asked questions about the Financial Account Information Exchange Act (FKAustG):

1. what exactly is the FKAustG?

The FKAustG is the German Financial Account Information Exchange Act. It regulates the automatic exchange of information on financial accounts between Germany and other participating countries to combat tax evasion.

2 When did the FKAustG come into force?

The FKAustG came into force on January 1, 2016.

3. what information is exchanged under the FKAustG?

Among other things, the following are exchanged:

• Name, address and tax identification number of the account holder
• Account number
• Year-end balance or value of the financial account
• Credited investment income (including interest and dividends)

4 Who is affected by the FKAustG?

The FKAustG mainly concerns:

• Financial institutions in Germany (banks, insurance companies, etc.)
• Account holder with tax residency in participating countries
• German tax authorities

5. do all accounts have to be reported?

No, not all accounts are reported in accordance with the Financial Accounts Information Exchange Act (FKAustG). There are certain thresholds and exceptions:

Threshold values

• Existing accounts of natural persons with a total balance or value of USD 1 million or less are subject to simplified and extended review procedures

Exemptions from the reporting obligation

• Certain pension accounts are exempt from the reporting obligation
• Deposit accounts with an annual balance of USD 50,000 or less do not need to be reported, except for deposit accounts held by legal entities
• Surrenderable insurance contracts with a cash value of USD 50,000 or less are exempt from the reporting requirement

Important notes

• The thresholds refer to the total balance or value of all accounts of an account holder at a financial institution
• Financial institutions must collect and assign the tax residency of the account holder, regardless of whether the account holder is a reportable person
• The reporting obligation applies to all relevant accounts that exist on January 1, 2016 or later

6. how often does the exchange of information take place?

The exchange of information takes place annually. Financial institutions must submit the data to the Federal Central Tax Office by July 31 of each year, which then exchanges it with the other countries by September 30.

7 How does the FKAustG differ from the US FATCA?

While the FCAustG is based on the multilateral CRS standard and provides for a mutual exchange of information, FATCA is a US law that primarily unilaterally regulates the reporting of account information of US taxpayers to the US tax authority IRS.

8 What happens if a financial institution does not fulfill its obligations?

Violations of the reporting and due diligence obligations can result in fines of up to 50,000 euros.

9. as the account holder, can I object to my data being passed on?

No, as the account holder you have no right to object to the transfer of data under the FKAustG, as this is a legal obligation.

10. how is data protection guaranteed in the FKAustG?

The transmitted data is subject to strict data protection regulations. It may only be used for tax purposes and must be protected accordingly. Compliance with data protection is checked regularly.