FATCA and the EU

546 thoughts on “FATCA and the EU”

1. The solution to FATCA is renunciation.

2. Another written question submitted to the EU Parliament by MEP in’t Veld. Don’t think I’ve posted this one before;
   http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//TEXT+WQ+P-2018-000724+0+DOC+XML+V0//EN&language=en
   “Parliamentary questions
   6 February 2018
   P-000724-18
   Question for written answer
   to the Commission
   Rule 130
   Sophia in ‘t Veld (ALDE) , Thierry Cornillet (ALDE)

   Subject: US tax reform affecting EU citizens and SMEs

   Along with Eritrea, the United States is one of two countries worldwide that uses a citizen-based taxation system. Non-resident US citizens and ‘US persons’ are obliged to file a US tax return and are subject to various cumbersome reporting requirements. This affects many EU citizens with dual nationality, such as ‘Accidental Americans’. The US Government has stepped up enforcement in recent years, putting pressure on US citizens and US persons abroad, with FATCA, for example, increasingly resulting in EU citizens being excluded from basic banking services. The new US GILTI tax is a heavy administrative and financial burden on European SMEs, and could possibly even lead to bankruptcies, while the length and cost of the procedure to renounce US citizenship is prohibitive for many.

   1) What diplomatic and legislative action does the Commission intend to take to protect the interests of EU citizens and SMEs against citizen-based taxation by the US and Eritrea?

   2) Though taxation is a purely national competence, does the Commission consider a joint EU approach is needed to adequately protect the rights and interests of European citizens and SMEs?

   3) Will the Commission conduct a full analysis of the impact on EU citizens and SMEs?
   Last updated: 12 February 2018”
   http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//TEXT+WQ+P-2018-000724+0+DOC+XML+V0//EN&language=en

   For a list of all of the MEP’ written questions, see;
   http://www.europarl.europa.eu/meps/en/28266/SOPHIA_IN+%27T+VELD_activities.html

3. Oops, I see that latest post of mine citing one of MEP in’t Veld’s written questions was already captured in a tweet of hers posted by @JC earlier in this thread.

   I’m losing track….

4. @badger

   “Another written question submitted to the EU Parliament by MEP in’t Veld. Don’t think I’ve posted this one before”

   No, it is a new one; I have just read it earlier today.

   Being paid by us European taxpayers (including ‘Accidental Americans’), Commissioner Moscovici will produce his usual mixture of regurgitated non-sequitors, useless non-answers and Eurocratic nonsense…

5. It is interesting to see that MEPs Sophie in’t Veld and Thierry Cornillet have introduced Eritrea into the discussion in their latest parliamentary written question to Moscovici.

6. EU Parliament response to petition by J.R. (French) re FATCA:

   See;
   ‘NOTICE TO MEMBERS – Petition No 1088/2016 by Mr J.R. (French) on the US’ Foreign Account Tax Compliance Act’s (FATCA) alleged infringement of EU rights and the extraterritorial effects of US laws in the EU
   Date : 16-02-2018 Reference :PETI_CM(2018)607954PE 607.954v02-00
   PETI
   Documents in dossier PETI/8/10404

   European Parliament
   2014-2019
   Committee on Petitions
   13.2.2018
   NOTICE TO MEMBERS

   Subject:Petition No 1088/2016 by Mr J.R. (French) on the US’ Foreign Account Tax Compliance Act’s (FATCA) alleged infringement of EU rights and the extraterritorial effects of US laws in the EU

   European Parliament
   2014-2019

   {PETI}Committee on Petitions

   {13/02/2018}13.2.2018
   NOTICE TO MEMBERS
   Subject: Petition No 1088/2016 by Mr J.R. (French) on the US’ Foreign Account Tax Compliance Act’s (FATCA) alleged infringement of EU rights and the extraterritorial effects of US laws in the EU
   1. Summary of petition
   The petitioner’s grievance mainly concerns the US’ Foreign Account Tax Compliance Act (FATCA) – as well as the intergovernmental agreements implementing it in the EU – which obliges European and other foreign financial institutions to report to the US tax authorities all holdings of their “US persons” customers. In his view, this law violates various fundamental principles of European law (including the right to respect for private and family life, the prohibition of discrimination and data privacy,) as well as the Payment Accounts Directive.
   While FATCA was purportedly targeted at fighting tax evasion by US resident taxpayers, the petitioner states that in practice it has affected a large number of European citizens and in particular so-called ‘accidental Americans’, citizens who are nationals both of the US and a Member State, as well as their non-US family members. Because non-compliance with the requirements imposed by FATCA results in heavy fines for financial institutions, many of them responded by avoiding all commercial business with customers presenting any US connection, whether actual or not.
   The petitioner states also that the extraterritorial application of US laws comes at a very high price for the EU’s economies and companies. He mentions, in this respect, the case of BNP Paribas, which was fined $8.9 billion by the US in 2014, even though it had not breached any French or European laws. The petitioner also expresses his concern about the fact that the exchange of information is not reciprocal and that the use by EU firms of US consultants and accountants is economic espionage under the veneer of legality.
   2. Admissibility
   Declared admissible on 11 January 2017. Information requested from Commission under Rule 216(6).
   3. Commission reply, received on 30 June 2017
   According to the petitioners, several “accidental Americans” or dual European/US nationals face repeated discrimination by European financial institutions, as they are precluded from accessing different financial products, including payment accounts, because of the compliance requirements imposed on European financial institutions by the Intergovernmental Agreements (“IGAs”) to implement the Foreign Account Tax Compliance Act (“FATCA”). In the petitioners’ opinion, compliance with FATCA would de facto be incompatible with the European Convention of Human Rights (ECHR) and the Payment Accounts Directive (2014/92/EU).

   Firstly, it must be noted that FATCA and the related IGAs are bilateral agreements negotiated between the United States and other countries, including Member States. Therefore, it is in the first place up to Member States to take into account the specifics of the US tax system as well as their Union law obligations when negotiating those Agreements, and to request revisions thereof in view of any practical issues or incompatibility with Union law faced or any further amendments, in particular with regard to full reciprocity.

   Secondly, with regard to the alleged breaches of the right to privacy, reference is made to Article 8 ECHR. The Commission observes that the fundamental right to privacy and protection of personal data are enshrined in the Charter of Fundamental Rights of the European Union. Member States are required by Union law to respect those rights when they are implementing EU law.

   Thirdly, with regard to the alleged incompatibility of the Payment Accounts Directive (PAD) with the FATCA IGAs, the Commission would like to point out that Chapter IV of the Payment Accounts Directive regulates access to payment accounts in the EU. Article 15 (“non-discrimination”) of the Directive provides: ‘Member States shall ensure that credit institutions do not discriminate against consumers legally resident in the Union by reason of their nationality or place of residence or by reason of any other ground as referred to in Article 21 of the Charter, when those consumers apply for or access a payment account within the Union. The conditions applicable to holding a payment account with basic features shall be in no way discriminatory’. Article 16 (“right of access to a payment account with basic features”) provides, essentially, that Member States must ensure the right for any consumer legally residing in the Union to open a payment account with basic features, i.e. a new type of product whose features are enshrined in the Directive, provided that this consumer complies with anti-money laundering rules. Notwithstanding the reporting requirements imposed on EU credit institutions under FATCA and the related IGAs, credit institutions designated by Member States are required to grant access to payment accounts with basic features to any consumer legally resident in the EU, under the conditions set out in the Directive.

   Conclusion

   The Commission is of the view that credit institutions designated by Member States according to Directive 2014/92/EU will have to grant access to payment accounts with basic features to any consumer legally resident in the EU, under the conditions set out in the Directive.

   4. Commission reply (REV), received on 13 February 2018
   As stated in the Commission’s initial observations, the US Foreign Account Tax Compliance Act (FATCA) is implemented through intergovernmental agreements (IGAs) negotiated bilaterally between the US and each Member State. Due to lack of support by Member States at the time, the European Commission did not submit a recommendation to the Council for an authorisation to open negotiations for an agreement on behalf of the Union. The information exchange requirements under FATCA as such are, however, similar to those in EU legislation (Directive 2014/107/EU) and to the OECD global standard for automatic exchange of financial account information, which is currently being implemented by over 100 jurisdictions.

   The Commission acknowledges that FATCA and the related IGAs appear to have the unintended effect of hindering access to financial services in the EU for American citizens and any person presenting indicia suggesting that he/she may be subject to FATCA (‘US persons’). This includes “accidental Americans” who were born in the US, but never requested US citizenship.

   The Commission is currently working with the financial industry to gather more information on how many residents in the EU might have difficulties obtaining financial services because they present FATCA indicia. While the Commission cannot force financial services providers to offer services to persons with FATCA indicia, it will enforce the Payment Accounts Directive (2014/92/EU) under which all residents in the EU have the right to a payment account with basic features.

   The Commission is also exploring with the financial industry how compliance with the existing FATCA rules can be made easier for financial services providers, reducing administrative burdens and the risk of incurring the heavy withholding tax that can be levied on the revenue of EU financial institutions from US sources.

   Lastly, the Commission would like to draw the attention of the Committee on Petitions to a letter sent on 8 May 2017 by the Maltese Presidency of the Council to the US Treasury, highlighting problems faced by residents, financial institutions and governments of the EU Member States in relation to FATCA, notably with regard to reporting data in the absence of a US tax identification or social security number.

   http://www.publicnow.com/view/3BEA19DA290105413A02B8C7500DB05124DCD503?2018-02-19-13:30:12+00:00-xxx3432

7. The Maltese letter referred to above is here;
   https://zoek.officielebekendmakingen.nl/blg-814463.pdf

8. Interesting that the Committee in its answer acknowledges the existence of ‘Accidental Americans’ in the EU “…who were born in the US, but never requested US citizenship. “…… but doesn’t acknowledge in its comments that the category of ‘Accidental Americans’ would also include EU citizens born in the EU – the citizens of EU countries, who the US deems to be US citizens via parentage.

9. ‘Letter of the Chair of the ART 29 WP to FATCA
   12/02/2018’

   http://ec.europa.eu/newsroom/article29/item-detail.cfm?item_id=614217

   “ARTICLE 29 Data Protection Working Party
   Subject: FATCA
   Dear Mr. Ryan,
   Brussels, 08 February 2018
   To the collective of European “accidental Americans”
   I am writing to you, on behalf of the Article 29 Working Party (WP29), to acknowledge receipt of your emails and notice of petition submitted to the European Parliament (EP) on September 1, 2016, and transmitted to WP29 on January 2017 regarding the impact of the U.S. Foreign Account Tax Compliance Act (FATCA) on European citizens who, due to U.S. citizenship law, are either “accidental Americans” or dual European/US nationals.
   I understand that your correspondence was submitted on behalf of the collective of European “accidental Americans”.
   In this correspondence, you requested the WP29 to provide its views on FATCA and the position European “accidental Americans” may find themselves in due to reporting requirements under FATCA, particularly as to the compatibility of these requirements with Article 8 of the European Charter of Human Rights (ECHR).
   With this response, I would like to address your concerns and provide an overview of the several actions that the WP29 has already undertaken with regards to the automatic exchanges of personal data for tax purposes and more specifically with regards to FATCA and the compliance of its implementing measures with data protection principles.
   In June 2012, the WP29 addressed a letter1 to the European Commission informing it of its concerns about FATCA, in advance of the signature of the proposed intergovernmental agreements between the US and each EU Member State for the implementation of FATCA.
   The letter made the argument that the personal data processing required by FATCA had no legal basis within EU or national law of a Member State and that this absence could lead to national Data Protection Authorities (DPAs) prohibiting the data processing in question.
   The WP29 also underlined the requirement that intergovernmental agreements (IGAs) signed between the U.S. and the individual European Member States, would need to comply with the principles laid down by the Directive 95/46. These principles include that of purpose limitation, transparency, proportionality, security, limited data storage and necessity.
   1 http://ec.europa.eu/justice/data-protection/article-29/documentation/other- document/files/2012/20120621_letter_to_taxud_fatca_en.pdf
   This Working Party was set up under Article 29 of Directive 95/46/EC. It is an independent European advisory body on data protection and privacy. Its tasks are descr bed in Article 30 of Directive 95/46/EC and Article 15 of Directive 2002/58/EC.
   The secretariat is provided by Directorate C (Fundamental rights and rule of law) of the European Commission, Directorate General Justice and Consumers, B-1049 Brussels, Belgium, Office No MO59 02/27
   Website: http://ec.europa.eu/justice/data-protection/index en.htm

   Finally, the WP29 particularly stressed the importance of complying with Articles 25 and 26 of the Directive 95/46 with regards to transfers of personal data to the US tax authorities.
   In 2015, the WP29 issued (i) a statement on the automatic inter-state exchanges of personal data for tax purposes2 (in February 2015) and (ii) guidelines for Member States on the criteria to ensure compliance with data protection requirements in the context of the automatic exchange of personal data for tax purposes (in December 2015)3.
   Through the February 2015 statement and the December 2015 guidelines, the WP29 provided insight to national governments and EU institutions for the framing of transfers of personal data for tax purposes with adequate and effective mechanisms to ensure the safeguard of fundamental rights and freedoms of individuals and an adequate level of data protection.
   Annex of the December 2015 guidelines contained a questionnaire addressed by the WP29 to European national tax authorities on automatic exchanges of data for tax purposes, including those carried out under FATCA, which again denotes the constant interest and monitoring of the proper implementation of FATCA and of its compliance with data protection legislation.
   As you will be most acutely aware, all EU Member States have now signed individual IGAs with the US. These IGAs provide the legal basis for the processing of the personal data of American nationals in the context of FATCA. In addition to the abovementioned questionnaire, EU DPAs have been monitoring the measures taken by European governments to implement FATCA at national level. As part of this ongoing exercise, there have been no occasions, to date, where a national DPA has had to prohibit the processing and transfer of personal data to the US under the FATCA regime.
   We understand however, that you are particularly concerned by the application of FATCA to European citizens who are either “accidental Americans” or dual European/US nationals.
   We regret to inform you that the WP29 is unable to form an opinion as to whether accidental Americans should be excluded from the scope of FATCA. Indeed, the interpretation of the notion of an “American taxpayer”, criterion triggering the application of FATCA, does not fall under our competence. The WP29 acts as an advisory body under the Data Protection Directive 95/46/EC to ensure that data protection principles are complied with consistently at EU level and cannot therefore comment on the scope of FATCA itself.
   Irrespective of the above, affected individuals or parties who feel aggrieved by the FATCA regime or its implementation in their respective EU Member State can raise their concerns or a complaint on grounds of personal data violations to their relevant national DPAs providing all necessary information to the case at hand4 or the appropriate court at national level as required. Also, in case of pure undue taxation issues, which do not fall under the realm of DPAs, affected individuals can contact their respective national tax authorities.
   Before I close this letter, I would like to point out that on 25 May 2018, the new European General Data Protection Regulation (GDPR) will come into force. Under this new legal
   2 http://ec.europa.eu/justice/data-protection/article-29/documentation/opinion- recommendation/files/2015/wp230_en.pdf
   3 http://ec.europa.eu/justice/data-protection/article-29/documentation/opinion- recommendation/files/2015/wp234_en.pdf
   4 Please find hereby the list of DPAs and their website links : file:///C:/Users/IRU/AppData/Local/Packages/Microsoft.MicrosoftEdge_8wekyb3d8bbwe/TempState/Download s/20171127_NationalDataProtectionAuthoritiespdf.pdf
   2
   framework, the same requirement for compliance with the principles of storage limitation, purpose limitation, data minimization, lawfulness, fairness, transparency, proportionality, security, necessity and oversight and redress will continue to apply. The GDPR also contains a newly established principle of accountability. Under that principle, it falls on data controllers to demonstrate how they are complying with the abovementioned principles as well as with all the provisions of the GDPR. This new regime also provides national DPAs with increased regulatory powers to ensure that data controllers meet their obligations.
   We hope that the clarifications contained in this letter will be of help to the collective of European “accidental Americans”.
   Yours sincerely,
   On behalf of the Article 29 Working Party,
   Isabelle FALQUE-PIERROTIN Chairwoman “

10. The GDPR referred to above;
    “…fter four years of preparation and debate the GDPR was finally approved by the EU Parliament on 14 April 2016. Enforcement date: 25 May 2018 – at which time those organizations in non-compliance may face heavy fines.

    The EU General Data Protection Regulation (GDPR) replaces the Data Protection Directive 95/46/EC and was designed to harmonize data privacy laws across Europe, to protect and empower all EU citizens data privacy and to reshape the way organizations across the region approach data privacy. …”…
    https://www.eugdpr.org/

11. badger – thanks very much for the information about these developments.

12. You’re very welcome. I am hoping that those with better more informed grasp of the EU context and these developments, can provide analysis of their significance.

13. Yes, I agree, that would be very welcome.

    The Commission’s inner workings are a mystery to me, but the change of tone in this reply is unmistakable. Especially this bit:

    “Due to lack of support by Member States at the time, the European Commission did not submit a recommendation to the Council for an authorisation to open negotiations for an agreement on behalf of the Union. The information exchange requirements under FATCA as such are, however, similar to those in EU legislation (Directive 2014/107/EU) and to the OECD global standard for automatic exchange of financial account information, which is currently being implemented by over 100 jurisdictions.”

    A hopeful interpretation:

    They colluded with the G20 in exploiting America’s CBT to impose CRS on European banks. Now it has come back to bite them, because America is now making use of CBT to get the upper hand in the tussle over taxing Apple etc.

    But all that may just be my wishful thinking. It may just be the French case on reciprocity that is spooking them into admitting they should have insisted on EU-level negotiations.

    Diminishing UK influence may also be a factor. UK tax havens have been coming in for a lot of bad press recently.

    “Interesting that the Committee in its answer acknowledges the existence of ‘Accidental Americans’ in the EU “…who were born in the US, but never requested US citizenship. “…… but doesn’t acknowledge in its comments that the category of ‘Accidental Americans’ would also include EU citizens born in the EU – the citizens of EU countries, who the US deems to be US citizens via parentage.”

    EU citizens born in the EU, with no US indicia, would not get misidentified as USPs. No worries on that score as far as I can see, They can have more US passports than Paul Manafort and still look nice and clean, thanks to the EU birthplace.

14. Also:

    “The Commission is also exploring with the financial industry how compliance with the existing FATCA rules can be made easier for financial services providers, reducing administrative burdens and the risk of incurring the heavy withholding tax that can be levied on the revenue of EU financial institutions from US sources.”

    Does this imply the EC and the banks are talking about renegotiation?

15. re; “…EU-level negotiations”, I remember that they really stonewalled MEP in’t Veld’s requests for information ex. https://www.ombudsman.europa.eu/en/cases/caseopened.faces/en/51510/html.bookmark and redacted a lot of it.

    They also appear to be more concerned with making things easier for the banks and barely acknowledge the impact on individuals.

16. And not sure what this is;
    https://www.ombudsman.europa.eu/en/cases/case.faces/en/51421/html.bookmark

    Tweet

    Case: 2177/2017/STI
    Opened on 22 Feb 2018 – Decision on 22 Feb 2018

    Related documents

    Case: 2177/2017/STI
    Case opened: The Commission´s alleged failure to protect EU citizens’ rights in the context of the Foreign Account Tax Compliance Act (FATCA) and the “Article 29 Working Party”’s failure to reply to the related correspondence

    http://europa.eu/!bJ46uw

17. “They also appear to be more concerned with making things easier for the banks and barely acknowledge the impact on individuals.”

    I would think that their position with regard to the IGA negotiations was to make use of the FATCA withholding threat to force CRS on EU banks – which succeeded. The interesting thing is that they now seem to be having some doubts. But it’s hard to decipher the cause. (And I may be misreading between the lines completely.)

    As for the impact on individuals – that’s the rôle of the ECJ, should a case ever get that far. The concern of the EC, in replying to citizens’ petitions and MEPs’ questions, is usually to defend its actions or inactions – i.e. cover it’s back. They seem to be suddenly clutching at falling trousers . It’s interesting.

    But I may be misinterpreting it.

18. I think the 2177 entry may be a placeholder which will become populated with information eventually.

19. A problem for me is that I can’t really see what the EU can do about the fact that America has made banks wary of US citizens.

20. @plaxy

    “A problem for me is that I can’t really see what the EU can do about the fact that America has made banks wary of US citizens.”

    The EU could reciprocate by slapping a withholding tax on US-based banks in Europe until they exempt US-born EU citizens from FATCA. This is not impossible to do.

21. “But all that may just be my wishful thinking. It may just be the French case on reciprocity that is spooking them into admitting they should have insisted on EU-level negotiations.”

    That is of their own making; legal actions will persist until citizens rights are upheld and protected.

22. @badger

    From the EU text:

    “The Commission is currently working with the financial industry to gather more information on how many residents in the EU might have difficulties obtaining financial services because they present FATCA indicia.”

    How long will we have to wait for this to occur?

    “While the Commission cannot force financial services providers to offer services to persons with FATCA indicia, it will enforce the Payment Accounts Directive (2014/92/EU) under which all residents in the EU have the right to a payment account with basic features.”

    This is an indirect way of confirming that the discrimination against EU citizens “with FATCA indicia” will carry on. Therefore, we are only allowed to entertain the thought of owning shares, not to actually trade them. Thanks for letting us know, Brussels.

23. @plaxy

    ‘ “The Commission is also exploring with the financial industry how compliance with the existing FATCA rules can be made easier for financial services providers, reducing administrative burdens and the risk of incurring the heavy withholding tax that can be levied on the revenue of EU financial institutions from US sources.” ‘

    “Does this imply the EC and the banks are talking about renegotiation?”

    Precisely, it appears to read that way. However, the Commission will be talking to the wrong people. They should, in fact, be talking to the EU27/28 as well as the US, not the banks. These FATCA negotiations have been reckless to say the least.

24. @badger

    Many thanks for the wealth of updates here!

25. “The EU could reciprocate by slapping a withholding tax on US-based banks in Europe until they exempt US-born EU citizens from FATCA. This is not impossible to do.”

    Of course it is. The EU doesn’t have the power to tax banks!