FATCA and the EU

366 thoughts on “FATCA and the EU”

1. The FATCA study posted by Plaxy above is very helpful. It has some very good arguments as to why/how FATCA violates EU law plus some ideas for action on both sides of the Atlantic. I hope other OECD governments read it and realise that the one-way street of FATCA data, especially data on their own residents and citizens, must be addressed. Yes, they all wanted FATCA initially, but the report shows some disillusionment as FATCA has not been the multilateral exchange that EU policymakers had hoped for.

   Mods – I think a separate post about this report would be appropriate.

2. There is to be a plenary debate soon, which may (or may not) lead to EC action.

3. ” they all wanted FATCA initially, but the report shows some disillusionment as FATCA has not been the multilateral exchange that EU policymakers had hoped for.”

   Important to note that this is a report commissioned by the Parliament, not the EC. Parliamentary reservations about FATCA were expressed from early on, in 2013:

   The European Parliament…15. Welcomes the US Foreign Account Tax compliance Act (FATCA) as a first step towards an automatic exchange of information between the EU and the US to fight trans-border tax fraud and tax evasion; regrets, however, that a bilateral/intergovernmental approach has been taken in the negotiations with the US rather than a common EU negotiating position; regrets the lack of full reciprocity in the exchange of information; calls for the respect of the rights of data protection for EU citizens in this context.

   http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//TEXT%20REPORT%20A7-2013-0162%200%20DOC%20XML%20V0//EN

   Whether the policy-makers have begun to share Parliament’s misgivings, remains to be seen. Personally I doubt it, but I hope that the FATCA problems may play into the ongoing Apple wars and eventually result in change.

4. @Karen, I agree that the report deserves its own post. As you note, it raises issues that equally or significantly apply to other jurisdictions other than the EU, quite apart from the EU specifics (ex. Canada).

   Perhaps this can help us with our own local struggles and lawsuits (and the UN complaint) having another official body from not just one country, but a block the size of the EU raise many of the issues we’ve been talking about for years. And it cannot be dismissed as the work of individual ‘Americans’ living ‘abroad’ who “don’t want to pay their fair share” etc. as Canadian MPs in support of the IGA did so cynically and ignorantly during the passage of the IGA enabling legislation here.

   The EU is also specifically and importantly explicitly noting that they owe a duty to EU citizens and residents – which is not negated by whether the US claims jurisdiction over them as well (I do quibble with the report’s mention of family, cultural and other NON-economic ties in defining who is or isn’t an ‘Accidental’ as a justification of defining taxable persons – since those ties or affinities have nothing to do with taxes).

   The CRA in Canada has been pretending that the FATCA IGA is necessary in order for Canada to receive information for its own domestic tax administration (but refuses to give any information that would substantiate that) and that this is somehow necessary on top of the reciprocal portions of the arrangements that had already been present for some time via our Canada/US tax treaty pre-FATCA – which were based on actual residency, not citizenship or quasi-citizenship (ex. greencards). This report helps to undermine those claims by our government and our Canada Revenue Agency in defence of the FATCA IGA and underscores that there is no compelling social policy goal being achieved by suspension/abrogation of our Charter of Rights and constitutional rights in this instance since there is no evidence that FATCA achieves its stated goals, there is no evidence that Canadians are using our local banking system to evade US taxes, there is no evidence that the group deemed to be ‘US persons’ with ‘US indicia’ are committing any crime or more likely to be tax evaders, or even to owe the US any taxes.

   The true reason that Canada signed the IGA was to avoid unwarranted economic sanction by the US – the stated FATCA withholding extortionate threat, and I would argue probably also other hidden and unstated and unrelated (to US CBT) trade, economic, and/or other politial issues (ex. oil pipelines, border ‘harmonization’, etc.). Our governments are not transparent to the citizens in whose name they purport to act.

   Lots of good stuff in this report.

5. “U.S. on Course to Land on European Tax Blacklist: EU Official”
   https://www.bna.com/us-course-land-n73014475976/

   If the U.S. doesn’t agree by June 2019 to exchange the bank account details of non-U.S. citizens with governments around the world, it will be placed on the European Union’s tax haven blacklist.

   The U.S. is on the clock as the 2019 deadline nears for adopting and applying the Organization for Economic Cooperation and Development’s common reporting standard, Valere Moutarlier, the EU’s head of direct taxation, told a new European Parliament tax investigative committee May 15. The Paradise Papers panel was set up in March following a data leak of more than 13 million files detailing the way wealthy individuals and large companies avoid taxes via offshore structures, such as trusts. …
   The EU is currently drawing up a list of sanctions for blacklisted countries that include withholding taxes on multinational corporate group dividends. The list is due to be finalized by the end of 2018.

   Moutarlier also noted that the 2017 U.S. tax act ( Pub. L. No. 115-97) has been referred to the OECD Forum for Harmful Tax Practices to determine whether it violates international standards, and the outcome will help determine whether the U.S. violates the EU’s corporate tax haven criteria. “The U.S. tax reform raises new corporate tax issues,” Moutarlier said.

6. Bloomberg report on the referral to the OECD Forum:

   “EU Requests OECD Review of U.S. Tax Law’s Harmful Provisions”
   https://www.bna.com/eu-requests-oecd-n57982089605/

   The EU wants the OECD to conduct a “fast-track” review of the U.S. tax changes, following February discussions among EU finance ministers on how to react to the law, and whether to mount retaliatory measures in the World Trade Organization, an EU diplomat told Bloomberg Tax.

   The U.S. cut its corporate tax rate to 21 percent from 35 percent in the 2017 tax act ( Pub. L. No. 115-97). The EU has been monitoring the situation for months, and has warned that several provisions—like a new base erosion and anti-abuse tax—may break international trade rules.

   After discussion about provisions, including the the base erosion and anti-abuse tax (BEAT) and the deduction for foreign derived intangible income (FDII), “it was decided to request a fast-track review by the OECD Forum for Harmful Taxation,” an EU diplomat told Bloomberg Tax March 7. The decision was made Feb. 28, the EU diplomat said. …

   EU experts say the BEAT may be incompatible with the OECD Model Tax Convention’s non-discrimination Article 24, according to a document drawn up by Bulgaria, which holds the rotating EU presidency. The document was obtained by Bloomberg Tax.

   “This is because the BEAT would in effect only apply to payments to foreign-related parties and would not apply to comparable payments to U.S. related parties,” the document said. “It could be further studied whether the BEAT would impact on genuine commercial arrangements that pose only a minimal risk to the U.S. tax base.”

   The FDII deduction works alongside the law’s requirement that U.S. shareholders of controlled foreign corporations pay tax on their global intangible low-taxed income (GILTI), This raises the question “as to whether this complies with international standards such as Base Erosion Profit Shifting Action 5,” the document said.

   The call for an OECD review follows an EU survey of bloc-based companies to determine the impact that the U.S. tax reform will have on their businesses. The survey is the first step the commission had to take in order to file a WTO complaint. …

   The provisions highlighted by the EU are also areas currently being reviewed by the U.S. Treasury Department. The House Ways and Means Committee is also fine-tuning the tax law’s international provisions.

   “It is clear that the US Treasury is limited in the changes that it can make through implementing legislation and cannot undo the law that has been passed by Congress,” the document said.

   Heh heh heh…

7. An interesting development…

   BBC: “Airbnb to report homeowners’ income to Danish tax authorities”

   http://www.bbc.co.uk/news/business-44166174

   Exchange of information appears to be getting fashionable nowadays…

8. I’ve written a post on the FATCA report that was submitted to the Petitions Committee of the European Parliament last week: http://fixthetaxtreaty.org/2018/05/22/fatca-developments-in-europe/

9. AirBnB’s website says:

   As a US company, we’re required to collect certain taxpayer information from hosts who appear to have US-sourced income. To add your taxpayer information, go to your Payout Preferences and complete the appropriate form. …

   Even if you’re not a US person and have no US listings, trips, or experiences, we may be required to collect certain documentation from you to determine if your earnings through Airbnb are subject to US tax reporting.

   Now why would a non-US-person with no US listings need to prove they’re not subject to US tax reporting on their non-US-source AirBnB earnings?

   US place of birth?

   “Give us your SSN and sign this W-9, or show us your CLN and sign this W8-BEN”

   Is that the deal, for US-born hosts, wherever resident?

10. Same with Tripadvisor:

    “What if I am not a US citizen / don’t advertise US properties?

    As a US company we are required to collect basic tax information to certify that you are not a US Citizen/US company and/or have withholding requirements.”

    This is absolute sh*t. So glad my children don’t have this indelible place-of-birth curse.

11. Is this the new thread we can come to comment even if slightly off topic?

    Plaxy: Indeed quite the mess when Airbnb and Tripadvisor start hunting for US person indicia. WTF?
    I too am ecstatic that my kids were born elsewhere.

    Are they really obligated by law to do this? I doubt it. Does Uber ask its drivers around the world if they are US persons? As far as I know, only banks have to do this. In addition, many exemptions are provided for local banks in the IGAs, although where I live they all seem to WANT to get US indicia.

12. Fred (B):

    “Is this the new thread we can come to comment even if slightly off topic? ;-)”

    

    “Are they really obligated by law to do this? I doubt it. ”

    Unfortunately I think they probably are, under US law. So they can withhold US tax.

    And local tax agencies probably won’t be far behind, as per Duality’s post above.

    “many exemptions are provided for local banks in the IGAs, although where I live they all seem to WANT to get US indicia.”

    Something I’ve learned during this FATCA saga – US birth / indicia now sets money-laundering alarm bells ringing for prudent bank managers. I think we have HSBC to thank for that.

    In view of the spreading plague, combined with the depressing response of the EC to the PETI FATCA report, I’ve messaged my offspring today suggesting they consider renunciation, in order to get CLNs to invalidate their baby passports. Just in case.

13. so joe the innkeeper iists his loft in Elbonia on Trip Advisor Joe is unAmerican. He accepts a 5k deposit for a weeks rental from Sally from New Jersey.

    I suppose in the twisted logic of the revenoors, that is US Source income. Holy Toledo,

14. I think Joe is OK as long as he wasn’t born in the US (which of course makes his money US money unless he can prove renunciation).

    Elbonia may take an interest, of course.

15. The more I think about all this, including Europe’s taxation and reporting frenzy (at least in my part of Europe) the more the US is starting to look like the safest place to put my money. At least it would if I had any money!!!

16. Probably. Got the name, might as well have the game.