The Foreign Account Tax Compliance Act (FATCA) is legislation enacted in March 2010 by the US Government, implemented on 1st January 2013.
The purpose of FATCA is to prevent American citizens from evading US tax by using foreign subsidiaries to invest in the US through foreign accounts. FATCA imposes a 30% withholding tax on foreign entities that refuse to disclose the identities of their US clients.
Foreign banks and other financial institutions, including foreign insurance companies, must therefore provide the evidence to verify US status within a time limit. Failure to provide evidence within the agreed timescale, or if the individual fails to disclose assets in full in their annual tax returns to the IRS, the foreign financial institution must treat their account as a recalcitrant account and must withhold all US source income and payments from them and will also be subject to 30% withholding tax.
If you are a US citizen residing in Spain, we recommend that you contact deVere Spain who will help you to understand the full implications of FATCA.