FATCA and the EU

546 thoughts on “FATCA and the EU”

1. The study http://www.europarl.europa.eu/thinktank/en/document.html?reference=IPOL_STU%282018%29604967 “commissioned by the European Parliament’s Policy Department for Citizens’ Rights and Constitutional Affairs at the request of the PETI Committee” has made it into a mention at a US tax blog.
   http://lawprofessors.typepad.com/intfinlaw/gatca/

2. Regarding Cecilia Wikström’s question to the European Commission in my recent comments, I notice that she requests an “oral” response. There might be an opportunity for the competent Commissioner to be grilled by MEPs?…

3. There’s to be a debate at a Plenary meeting in July (or possibly June, I forget). EC and Council both present, and the Resolution will be voted on. See the PETI agenda page for the 16/May meeting for a link to the Resolution, and see upthread for Amendments to the Resolution, posted above by Karen.

4. @plaxy

   Thank you for this; I must have missed Karen’s link to the Resolutions.

5. Not sure if this is new. Mentions CBT as well as FATCA.

   Question (to the EC) for written answer, Sophie in’t Veld and others.

   “US citizens who are ‘accidental Americans’ (i.e. who hold US citizenship through having been born on American soil, but who have never lived in the USA and/or do not have any close connection with the country) are subject to the extra-territorial application of US law and sometimes encounter problems in their daily lives as a result. One particularly thorny issue is citizenship-based taxation (CBT), which requires such individuals to declare their income to the US Internal Revenue Service. Laws such as the Foreign Account Tax Compliance Act (FACTA) or the Securities Act, which both apply in the EU, sometimes prompts European banks to refuse bank account applications from such individuals, or place restrictions on the financial investments they can make.

   1. Is the Commission aware of the problems encountered by these ‘accidental Americans’, most of whom are also EU citizens, and has it raised the issue in talks with the US authorities?

   2. How does it plan to deal with these problems?”

6. Part 2 of my post on FATCA developments in Europe – and how they might help the rest of us. http://fixthetaxtreaty.org/2018/06/06/fatca-developments-part-2/

7. Duality:

   “ I must have missed Karen’s link to the Resolutions.”

   The links have got a bit sprinkled out among different posts and threads. To summarise:

   The Report:
   http://www.europarl.europa.eu/thinktank/en/document.html?reference=IPOL_STU%282018%29604967

   The Oral Question:
   http://www.emeeting.europarl.europa.eu/committees/download.do?docUrl=http%3A%2F%2Fwww.europarl.europa.eu%2Fmeetdocs%2F2014_2019%2Fplmrep%2FCOMMITTEES%2FPETI%2FDV%2F2018%2F05-16%2FOQ_FATCA_COM_Council_EN.pdf

   The Resolution:
   http://www.emeeting.europarl.europa.eu/committees/download.do?docUrl=http%3A%2F%2Fwww.europarl.europa.eu%2Fmeetdocs%2F2014_2019%2Fplmrep%2FCOMMITTEES%2FPETI%2FRE%2F2018%2F05-16%2F1151349EN.pdf

   The Amendments to the Resolution:
   http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-%2F%2FEP%2F%2FNONSGML%2BCOMPARL%2BPE-622.251%2B01%2BDOC%2BPDF%2BV0%2F%2FEN

   As I understand it, if the Resolution is adopted it will express the EP’s position, and (per final para) be forwarded to the Commission and Member States, who will presumably then be required to consider the various things the Resolution urges them or calls on them to do. Not clear to me what happens after that. Responses, presumably?

8. I said:

   “As I understand it, if the Resolution is adopted it will express the EP’s position, and (per final para) be forwarded to the Commission and Member States, who will presumably then be required to consider the various things the Resolution urges them or calls on them to do. Not clear to me what happens after that. Responses, presumably?”

   Apparently not. Adoption of the Resolution seems to be the endpoint, as far as I’ve been able to discover.

9. In short, although adoption of the Resolution would be a fantastic achievement, I don’t see that it’s likely to result in action.

   The EC will continue to check up on Member States’ enforcement of the PAD, but the PAD only guarantees the right to a basic account, which is simply not enough.

   When it comes to the GDPR, unfortunately but unsurprisingly Member States are allowed derogations on certain grounds, including the following:

   economic or financial interests, including budgetary and taxation matters

   Eventually, however, the question of rights may come before the ECJ; at that point, if the ECJ rules against FATCA, action must surely follow. I hope.

10. In the meantime, I suggest that any EU dual applying to open a new account should answer “no” to questions about US tax-residence, if they have no US assets/income and have not filed US tax returns since living in the EU; and complain to their national regulator/ombudsman if the account is refused.

11. http://www.europarl.europa.eu/sides/getAllAnswers.do?reference=E-2018-001994&language=EN
    Parliamentary questions
    8 June 2018
    E-001994/2018
    Answer given by Mr Moscovici on behalf of the Commission

    “The Foreign Account Tax Compliance Act (FATCA) agreements (IGA) between EU Member States and the United States (US) do not fall within the competence of the Commission unless they breach EC law. Member States have broad freedom to conclude tax agreements as long as they respect their obligations under the EU Treaties. Member States are bound by European data protection law, as contained in the Charter on Fundamental Rights and Directive 95/46/EC. As the competent enforcement authorities, the EU national data protection authorities (DPAs) monitor the processing of personal data in the context of FATCA.

    In February 2018, the article 29 Working Party (which brings together EU DPAs) confirmed there have been no instances where processing or transfers under the FATCA regime were prohibited. The IGA state that Member States will collect information on ‘US persons’ with financial accounts in their territory and send it to the US. The US rules on tax residence are unusual but have been accepted at international level and are reflected in the US bilateral tax treaties. As the exchange of this information aims to ensure the correct assessment of tax liabilities and it can only be used for tax purposes, it is not contrary to the fundamental freedoms. An international standard inspired by FATCA was agreed and these exchanges are now standard practice worldwide.

    Discrimination against consumers residing in the Union would be in breach of the Payment Accounts Directive (PAD). Complaints about breaches of the PAD must be addressed to the national authorities. In March 2018, the European Banking Authority consulted national supervisors on how many consumers had not been able to open or keep a payment account due to FATCA. Only one national authority received FATCA-related complaints.
    Last updated: 8 June 2018 Legal notice”

12. Below is the question that the ‘answer’ above purports to answer. Note that the Commission ‘answer’ doesn’t address this important part of the question; “…In addition, can the Commission look into the situation of so-called ‘accidental Americans’ (revealed by FATCA) with a view to finding a fair and equitable solution for them, given that they are first and foremost EU citizens and it is the Commission’s duty to protect them?”

    “Parliamentary questions
    4 April 2018
    E-001994-18
    Question for written answer
    to the Commission
    Rule 130
    Luke Ming Flanagan (GUE/NGL)

    Subject: US Foreign Account Tax Compliance Act (FATCA)

    Given the reluctance on the part of the article 29 Working Party to take a view on the topic, the recent opinion of the ECJ as regards the Passenger Name Registry agreement concluded by the EU with Canada, recent decisions of the ECJ on data privacy and tax matters (M.N. and Others v. San Marino and BFB Villa-Nova v. Portugal), and the very serious consequences the Foreign Account Tax Compliance Act (FATCA) — a US extraterritorial law — is having inside the EU and on law-abiding EU citizens, can the Commission state whether it considers FATCA and its implementation by EU banks to be compatible with EC laws and EU sovereignty?

    In addition, can the Commission look into the situation of so-called ‘accidental Americans’ (revealed by FATCA) with a view to finding a fair and equitable solution for them, given that they are first and foremost EU citizens and it is the Commission’s duty to protect them?
    Last updated: 16 April 2018”
    http://www.europarl.europa.eu/sides/getDoc.do?type=WQ&reference=E-2018-001994&language=EN

13. Good catch, Badger. There’s also this question that doesn’t appear to have been answered yet: http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//TEXT+WQ+E-2018-002580+0+DOC+XML+V0//EN which is specifically about Accidental Americans:

    Subject: ‘Accidental Americans’ in the European Union
    US citizens who are ‘accidental Americans’ (i.e. who hold US citizenship through having been born on American soil, but who have never lived in the USA and/or do not have any close connection with the country) are subject to the extra-territorial application of US law and sometimes encounter problems in their daily lives as a result. One particularly thorny issue is citizenship-based taxation (CBT), which requires such individuals to declare their income to the US Internal Revenue Service. Laws such as the Foreign Account Tax Compliance Act (FACTA) or the Securities Act, which both apply in the EU, sometimes prompts European banks to refuse bank account applications from such individuals, or place restrictions on the financial investments they can make.

    1. Is the Commission aware of the problems encountered by these ‘accidental Americans’, most of whom are also EU citizens, and has it raised the issue in talks with the US authorities?

    2. How does it plan to deal with these problems?

    As for the “Answer” above – it does not address the fact that, due to tax credits and limited treaty benefits, most EU residents who are also US citizens have zero US tax liability – therefore, in the case of non-US residents FATCA does not really reduce tax evasion. It is also infuriating that they just blindly accept the “right” of the US to tax anyone they decide is a citizen, no matter how tenuous the connection. Finally, with respect to financial institution discrimination, they doggedly state that everyone has the right to a basic payment account and that there are very few reports of this right being violated. Discrimination with respect to other types of accounts – including retirement accounts, mutual funds, brokerage accounts – is rampant and doesn’t seem to be a problem as far as the Commission is concerned.

14. Discrimination won’t be a problem for the Commission or for the Member States, until / unless there is a ruling from the ECJ. If that ever happens, the Member States will have to comply.

15. Moscovici stated that the “US rules on tax residence are unusual but have been accepted at international level”.

    A fictitious residence and double taxation are far worse than “unusual” …

16. LIBE meeting on 11 June – Privacy shield, Security Package

    07-06-2018 – 13:20
    Sir Julian King
    The Committee on Civil Liberties, Justice and Home Affaires will vote, during its extraordinary meeting on 11 June in Strasbourg, on its resolution on the adequacy of the protection afforded by the EU-US Privacy Shield. It will also hold an exchange of views with Julian King, Commissioner for Security Union who will present the recent Security Package.

    http://www.europarl.europa.eu/committees/en/LIBE/home.html

    http://www.emeeting.europarl.europa.eu/committees/agenda/201806/LIBE/LIBE(2018)0611_1/sitt-8497824

    http://www.europarl.europa.eu/meetdocs/2014_2019/plmrep/COMMITTEES/LIBE/RE/2018/06-11/1149002EN.pdf

    FATCA is not mentioned in the resolution, but paragraph 17 is fascinating:

    Highlights the persisting obstacles concerning the redress for non-US citizens subject to a surveillance measure based on section 702 FISA or EO 12333 due to the procedural requirements of “standing” as currently interpreted by the U.S. courts, in order to enable non-US citizens to bring legal actions before US courts against decisions affecting them.

17. @Karen, thanks, I had forgotten about that other pending question. Let’s hope it gets a more substantive answer. Thankfully MEP in’t Veld is persistent when the original question isn’t answered.

    Found this as well;
    For those in this MEP’s area ( https://www.northeastlabour.eu/jude-kirton-darling North East of England ), I found this statement of support for ‘Accidental American’ EU citizens/residents;
    “..Jude Kirton-Darling MEP, who sits on the Petitions Committee in the European Parliament where these issues were first heard last year, has supported the petitions and wants to see a commitment across the whole of the EU to addressing the problem that has caused so much hardship to some EU citizens.

    Labour MEPs will continue to support Accidental Americans in Europe and their families in the parliament-wide discussion which will take place during the plenary session this July.”
    https://www.northeastlabour.eu/issue-%E2%80%98accidental-americans%E2%80%99-and-what-eu-doing-help

18. OECD continues to issue the US a pass on the reciprocity and transparency front – see footnote #1
    https://www.oecd.org/tax/transparency/AEOI-commitments.pdf

19. There is another response to Sophie in ‘t Veld’s written question concerning holiday rental platforms. (Click on the ‘Answers’ button for the Commission’s response.)

    Subject: Holiday rental platforms required to hand over EU citizens’ tax information to US tax authority

    http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//TEXT+WQ+E-2018-002127+0+DOC+XML+V0//EN&language=EN

20. There seems to be a problem loading the “answer” page.

21. EN
    E-002127/2018
    Answer given by Mr Moscovici on behalf of the Commission (15.6.2018)

    According to the available information, the collection of the information relates to basic tax information to certify that the beneficiary is not a US Citizen/US company and/or has withholding requirements. As the aim of the collection of this basic information is needed to ensure all relevant taxpayers pay their tax liabilities, the collection does not seem to infringe EU law. To date, the Commission has received no evidence indicating the contrary.

    To the extent that internet platforms for renting out (holiday) accommodation are subject to European data protection law, they must comply with data protection requirements when submitting personal data to the US Internal Revenue Service, including with rules on international transfers. As the enforcers of data protection law, the national data protection authorities (DPAs) of the Member States are competent to deal with specific questions or complaints concerning potential data protection violations in the context of the processing of taxpayer information. DPAs have the power to hear complaints, investigate, and if necessary, intervene, including by prohibiting international transfers. In addition, individual redress can be obtained through the national court system. At present, the Commission has received no information indicating that data protection rules in this context are not adequately enforced in the Member States.

22. European “Blacklist” Status May Hit Home
    https://www.lexology.com/library/detail.aspx?g=18a715d2-c773-494b-91bd-5d16483203c7

    The European Union has given the United States an ultimatum – update the Foreign Account Tax Compliance Act (FATCA) to comply with the European Union’s Common Reporting Standard (CRS) by the end of 2018 or be blacklisted as an abusive tax haven.
    [..]
    …the FATCA legislation is missing an important aspect of the CRS minimum standards – reciprocity. FATCA by design requires financial institutions in other countries to disclose information about American account holders but does not hold US financial institutions to the same standards. This unfortunately makes the United States attractive to foreign corporations that want to park their assets in order to avoid paying taxes in their home countries.

    It will be even more unfortunate if the US actually makes it onto the blacklist because this means that people who just want to protect their assets in a US trust, and through US financial institutions, will be less comfortable doing so. The average person who sets up a trust is not taking part in some subversive plot to defraud their government, they just want to protect their privacy, their assets, and their families from unforeseen and unfair liabilities.

23. Thanks @duality and @plaxy for finding and for posting that latest ‘answer’ re MEP in’t Veld’s question re EU holiday platforms.

24. Not clear to me what answer Ms in’t Veld was hoping to elicit, given that use of the platforms (and therefore supplying the tax information) is voluntary. Dismaying for an EU citizen or resident with a US birthplace – especially if it’s the first time they find out they’re a US tax subject – but it’s hard to see what the EU could do about it, or why they would have any motive to intervene. It doesn’t seem likely that the Commission is keen to encourage EU citizens/residents to let via AirBnb.

25. It would be interesting to see a question about FBAR and data protection. It’s not voluntary, as far as the US is concerned, yet there’s no secure platform for transmission.

    The Commission has stated that the EU “recognises” America’s right to tax USCs resident in the EU, but FBAR is not tax law. A question about FBAR and data protection might bring forth clarification as to whether the EU “recognises” America’s right to treat EU residents’ local accounts as “offshore” and therefore reportable to FINCEN.