Foreign Account Tax Compliance Act: France FATCA and American Expats

By Expat News

France is the latest country to join the FATCA club. On November 14, 2013 France has become one of the 10 countries that signed an IGA (Intergovernmental Agreement) with the United States. Earlier we wrote an article What is FATCA. The Foreign Account Tax Compliance Act was enacted in 2010. France actively participated in developing IGA models with Germany, the UK, Italy, Spain and Italy so it comes at no surprise that France FATCA has been signed within a short period of time.

France FATCA (Foreign Account Tax Compliance Act) and American Expats

How often will the information be exchanged under France FATCA?

The United States of America and France will exchange the information annually on an automatic basis under France FATCA.

How does France FATCA affect French financial institutions?

Due to several delays many people hoped that the FATCA expansion would be halted. However, improving international tax compliance is on the agenda of various countries. Consequently, the FATCA provides a way to fight tax evasion so it is unlikely that the FATCA would be terminated.

Under FATCA, foreign financial institutions are required to sign an agreement with the USA government and to report the information about the accounts and financial assets in which US persons have a substantial interest. If FFIs or Foreign Financial Institutions do not comply with the FATCA requirements, they will be subject to a 30% withholding tax on all US-sourced payments. Since the USA is the major trading partner for many countries, non-compliant foreign financial institutions will not be able to take advantage of profitable US operations.

The purpose of an intergovernmental agreement (IGA) is to facilitate the compliance process of foreign financial institutions. For example, France, like other countries, has local privacy laws. France signed Model 1 IGA agreement. Under the France FATCA, foreign financial institutions will report the information to the French government. Then the government of France will send this information to the Internal Revenue Service. Since this is a reciprocal agreement, the US financial institutions will report the information about the accounts owned by French citizens and residents.

Which financial accounts are not required to be reported under France FATCA?

The intergovernmental agreement between the US and France outlines a list of accounts are exempt from reporting requirements:

  1. Preexisting Individual Account with a balance or value that does not exceed $50,000 as of June 30, 2014.
  2. Preexisting Individual Account that is considered a Cash Value Insurance Contract or an Annuity Contract with a balance or value of $250,000 or less as of June 30, 2014.
  3. Preexisting Individual Account that is a Cash Value Insurance Contract or an Annuity Contracts that are not offered to US residents.
  4. Deposits with a balance of $50,000 or less.

“Preexisting account” is the account that has been maintained by a financial institution as of June 30, 2014.

Are French financial institutions prepared for France FATCA?

Signing an intergovernmental agreement is just one part of the puzzle. Implementing the France FATCA by financial institutions is the most challenging aspect. NICE Actimize Financial Services surveyed 100 financial institutions to determine their understanding of FATCA. NICE Systems is the largest provider of a single financial crime, risk and compliance software platform for financial institutions. Per their survey, 55% of institutions are still not sure about the FATCA details. This lack of understanding was due to regulatory requirements, lack of FATCA expertise, impact on their operations and data issues. Only 5% of financial institutions indicated that they are almost ready to implement the FATCA successfully.


American expats must be prepared for the FATCA. American expats living abroad are encouraged to become compliant before the France FATCA comes into effect. If Americans have additional questions about the FATCA filing requirements for individuals or expat tax returns, they should contact an expat tax CPAs. International tax experts at Artio Partners will be pleased to review the individual FATCA requirements.