FATCA and the EU

546 thoughts on “FATCA and the EU”

1. https://youtu.be/t_Il-rL5TiI
   ‘”FATCA infringements on EU rights” petition hearing at the European Parliament ‘
   re;

   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
   Petition treated as confidential 194 Supporters – Status: Available to supporters

   Petition data

   Summary title: 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

   Petition number: 1088/2016

   Topics: Taxation

   Country: European Union

   Name of association: Collective of European citizens who are either “accidental Americans” or dual European / US citizens

   Petitioner data

   Name: J. R.

   Petition Summary

   “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.”

   https://petiport.secure.europarl.europa.eu/petitions/en/petition/content/1088%252F2016/html/Petition%2Bre.%2B%2528i%2529%2Bthe%2Binfringement%2Bof%2BEU%2Brights%2Bfrom%2BFATCA%2Band%2B%2528ii%2529%2Bthe%2Bextraterritorial%2Beffect%2Bof%2BUS%2Blaws%2Binside%2Bthe%2BEU

2. In between 3-6 weeks ( see rules here for written questions https://epthinktank.eu/2014/12/05/parliamentary-questions/ ) we should have the EU Parliament’s answers to the latest questions (those below require a written response) re FATCA as submitted by MEP in’t Veld;

   Parliamentary questions
   23 August 2017
   P-005250-17
   Question for written answer
   to the Commission
   Rule 130
   Sophia in ‘t Veld (ALDE)

   Subject: Multiple reporting requirements for EU citizens under FATCA and the associated IGAs

   The Foreign Account Tax Compliance Act (FATCA) is a US law that was officially enacted to combat tax fraud committed by US tax residents through offshore accounts. The law forces non-US financial institutions to identify and report to the US Internal Revenue Service all their ‘Us person’ clients. It was implemented in Europe by means of bilateral intergovernmental agreements (IGA) concluded between the EU Member States and the US. EU citizens who are active in more than one Member State to have concluded an IGA are subjected to individual FATCA reporting requirements in each Member State on the basis of each agreement.

   1. “Is the Commission aware that, under FATCA and the associated IGASs, EU citizens are subjected to similar reporting requirements in each Member State in which they are active?”

   2. “Could the Commission outline how many EU citizens could be affected by this repercussion? Does it intend to take any action to assist and protect EU citizens?”

   3. Does the Commission consider the practice of multiple FATCA reporting requirements in different Member States contrary to the Treaty provisions on the free movement of people? If so, how will it address this violation of EU citizens’ rights?”
   Last updated: 30 August 2017 Legal notice

   http://www.europarl.europa.eu/sides/getDoc.do?type=WQ&reference=P-2017-005250&format=XML&language=EN

3. Reminder for those in the EU, this petition https://american-accidental.com/en/support-the-petition-against-fatca-at-the-european-parliament/ appears to still be collecting signatures;
   https://petiport.secure.europarl.europa.eu/petitions/en/petition/content/1088%252F2016/html/Petition+re.+%2528i%2529+the+infringement+of+EU+rights+from+FATCA+and+%2528ii%2529+the+extraterritorial+effect+of+US+laws+inside+the+EU
   and,
   there is still the survey here;
   https://american-accidental.com/

4. Correction re the survey – appears to also include ‘accidental Americans’ outside the EU.

5. “Report | Doc. 14401 | 20 September 2017
   The activities of the Organisation for Economic Co-operation and Development (OECD) in 2016-2017

   Committee on Political Affairs and Democracy

   Rapporteur : Mr Alfred HEER, Switzerland, ALDE

   Origin – Reference to committee: Bureau decision, Reference 4177 of 25 January 2016. 2017 – Fourth part-session
   Summary

   The report takes a look at the macro-economic outlook for 2017-2018, as analysed by the OECD. The conclusion is that the ongoing economic recovery continues to be slow, sluggish and fragile and that the slightest negative shock could trigger a new downturn. It is therefore important for public policymakers to use their increased fiscal space to carry out structural reforms and break out of this sluggish growth.

   The report also examines the progress made in taxation, through the introduction of exchanges of information, which have already helped, thanks to greater transparency, to fight against international tax evasion. The BEPS project, which is designed to prevent base erosion and the shifting of the profits of multinational companies, also contributes to this progress. The redefinition of the international tax system appears to be well under way and is, for the time being, an example of successful multilateralism.”…………
   http://assembly.coe.int/nw/xml/XRef/Xref-XML2HTML-en.asp?fileid=24016&lang=en

   ………..”79. While the other measures recommended by the OECD are also useful, they all reflect the Organisation’s commitment to its existing procedures and its reluctance to promote more controversial mechanisms. In my view, however, if we are to avoid States taking bilateral reprisals which would negate the multilateral practices promoted by the OECD, such as making the implementation of certain recommendations conditional on compliance with the principle of reciprocity, it is necessary to go further. In terms of the automatic exchange of information, this has happened with regard to the United States, which is a member of Global Forum and has ratified the Convention on Mutual Administrative Assistance but not the 2010 amending protocol. Nevertheless, it has decided not to use it in the area of banking data and instead apply its own Foreign Account Tax Compliance Act (FATCA) information exchange system, which requires foreign banks to supply data to the US Treasury Department without full reciprocity of information being transferred in return from US banks to the States which supplied the said data. In response to this American freeriding, most financial centres have removed the United States from the list of their partner jurisdictions.”
   http://assembly.coe.int/nw/xml/XRef/Xref-XML2HTML-en.asp?fileid=24016&lang=en

6. American freeriding – apt phrase.

   Thanks badger. A very interesting report.

7. @plaxy, since I don’t have any feel for the EU context, hard to know whether the clearly critical ‘American free-riding’ characterization will be read and hit home somewhere where it might count, but heartened that somebody felt secure enough to use a clear pejorative phrase in an official report when describing the US behaviour instead of some more of that feeble “the US gets a hall pass” starred footnote the OECD gives the US in its own little exceptional category re the CRS.

   See the ‘special’ US footnote at the bottom of the document – footnote 1 – as of Aug 2017, still the ONLY footnote and the only country with a special hall pass.
   http://www.oecd.org/tax/automatic-exchange/commitment-and-monitoring-process/AEOI-commitments.pdf

8. Latest question re FATCA posed by MEP in’t Veld;

   Parliamentary questions
   23 August 2017
   P-005250-17
   Question for written answer
   to the Commission
   Rule 130
   Sophia in ‘t Veld (ALDE)

   Subject: Multiple reporting requirements for EU citizens under FATCA and the associated IGAs
   Answer(s)

   “The Foreign Account Tax Compliance Act (FATCA) is a US law that was officially enacted to combat tax fraud committed by US tax residents through offshore accounts. The law forces non-US financial institutions to identify and report to the US Internal Revenue Service all their ‘Us person’ clients. It was implemented in Europe by means of bilateral intergovernmental agreements (IGA) concluded between the EU Member States and the US. EU citizens who are active in more than one Member State to have concluded an IGA are subjected to individual FATCA reporting requirements in each Member State on the basis of each agreement.

   1. Is the Commission aware that, under FATCA and the associated IGASs, EU citizens are subjected to similar reporting requirements in each Member State in which they are active?

   2. Could the Commission outline how many EU citizens could be affected by this repercussion? Does it intend to take any action to assist and protect EU citizens?

   3. Does the Commission consider the practice of multiple FATCA reporting requirements in different Member States contrary to the Treaty provisions on the free movement of people? If so, how will it address this violation of EU citizens’ rights?”
   Last updated: 30 August 2017

   And here is the response;

   http://www.europarl.europa.eu/sides/getAllAnswers.do?reference=P-2017-005250&language=EN
   “Parliamentary questions
   28 September 2017
   P-005250/2017
   ‘Answer given by Mr Moscovici on behalf of the Commission’

   “The intergovernmental agreements (IGA) to implement the Foreign Account Tax Compliance Act (FATCA) signed by the United States entail that each jurisdiction will collect information on any ‘US person’ with financial accounts in its territory and send it to the US. Each Member State signed an IGA in the use of its national competences, and as such the collection of the relevant information by each Member State derives from this commitment. It should be noted that only EU citizens who also meet the requirements to be deemed a ‘US person’ will have their relevant information sent to the US.

   The Commission does not monitor nor collect information on FATCA implementation. No bilateral intergovernment agreement has been found to be in breach of EC law.

   As the exchange of financial account information aims at ensuring the correct assessment of tax liabilities in the jurisdiction where an individual is resident for tax purposes, the Commission considers that it is not contrary to the fundamental freedoms, such as the free movement of people. It should be borne in mind that an international Common Reporting Standard based on FATCA has now been developed and implemented worldwide. Therefore EU citizens with financial accounts in other Member States or in any other jurisdiction that has implemented the Common Reporting Standard will also see their financial information being collected and reported to their country of residence for tax purposes by each jurisdiction where they hold a financial account.”
   Last updated: 3 October 2017

   Never answers question of how many EU citizens and residents are affected. The IGAs weren’t tested in courts, so the fact that they haven’t been found unlawful is like saying that by default they’re lawful unless and until someone mounts a challenge in each member state and then found unlawful. Doesn’t answer how it could be lawful to discriminate on the basis of national origin/nationality/parentage/birthplace against ‘only’ those EU citizens who a foreign country – the US chooses to deem as taxable ‘US persons’ – which we know is a very broad category subject to change at US whim. Also ignores that it affects the spouses, family, business partners and employers of those deemed US persons if they are joint accountholders, etc.

9. Status of EU Nationals in the UK – email alerts

   https://gov.smartwebportal.co.uk/homeoffice/public/webform.asp?id=67&id2=627DF7&active=True

10. I was quite baffled by a recent article elaborating on the possibility of EU citizens’ post-Brexit application fee (of £72) to be paid in full by the European Commission.

    http://www.independent.co.uk/news/uk/politics/brexit-eu-citizens-rights-fee-charge-cost-european-commission-pays-juncker-verhofstadt-a8173721.html

    Such magnanimous support for EU citizens living in Britain.

    So, for US-born EU citizens who are suffering from the wrath of Fatca, why won’t the Commission pay for their application fee (of $2,350) to relinquish/renounce their state-imposed US citizenship?

    Such hypocrisy…

11. @duality
    That is because the EU has argued successfully with the UK that EU citizens residing in the UK have aquired certain rights in EU law that cannot now be taken away, hence those citizens should not now have to pay for those rights.
    Unfortunately the right to renounce citizenship and the cost associated with that depends on the country concerned.

12. “those citizens should not now have to pay for those rights”

    What about the right not to be discriminated on grounds of birth and not to be taxed twice? The European Commission allowed the United States to impose their citizenship onto EU citizens to enforce their fiscal laws extraterritorially, so the Commission should pay for the consequences of its actions.

13. “What about the right not to be discriminated on grounds of birth”

    I agree with you on that point, but so far no one has brought a case against the government of an EU country (which would be the first step).

    A group in France is exploring the feasibility of such a case, I believe. I suppose it takes a long time. And of course funding is likely to be a problem.

14. @plaxy

    I am only aware of a case presented before a Dutch human rights tribunal some years ago. A US-born Dutchman was discriminated by his investment house so consequently sued them. He won the case, though this was not taken any further…

15. Plaxy and Duality
    “What about the right not to be discriminated on grounds of birth”
    I am sure we all agree on this point and it’s high time the EU did something about it, and I wish France would get a move on, but the points involved are different.
    Dual American /EU citizens have the right to renounce just as everyone else anywhere.
    EU citizens living in the UK at one stage were having their rights to remain threatened (especially those there for less than 5 yrs) and after a protracted argument the UK at last gave way but wanted them to pay for the administration of those rights they already had had bestowed on them by a binding treaty.
    Dual American /EU citizens will benefit from the EU paying their admin bill to remain in the UK
    Dual American /UK citizens will still be allowed to remain. Both will have to pay renunciation fees like all other Americans everywhere.

16. I believe that was mentioned recently by Fred(B) in another thread. As I recall, the customer sued the bank, not the government. The FI was trying to avoid the costs of complying with the IGA by dumping all USC customers? I may be misremembering

17. @Plaxy
    “European Commission allowed the United States to impose their citizenship onto EU citizens to enforce their fiscal laws extraterritorially, so the Commission should pay for the consequences of its actions.”

    The EU has not entered into any treaty or relationship as to the nature under which the US can or cannot influence the way it chooses to award the citizenship of its nationals.
    It has however agreed to an illegal non treaty (non ratified by congress) FATCA agreement with the US which certainly should be re assessed.

18. @ Plaxy
    Yes, I believe I read something similar. However as far as I know the few Swiss banks who take US customers charge a larger admin fee than for non US customers, not sure if that is still true though.

19. Heidi – “I am sure we all agree on this point and it’s high time the EU did something about it, and I wish France would get a move on, but the points involved are different.”

    Yes indeed. Sorry, I did go off on a bit of a tangent there.

    “Dual American /EU citizens will benefit from the EU paying their admin bill to remain in the UK”

    USCs who only have EU freedom-of-movement residence rights will actually end up better off than USCs on 5-year settlement visas. The EU residence right was always precarious but now suddenly it’s transmuted into the road to ILR and citizenship. 🙂

20. “…the few Swiss banks who take US customers charge a larger admin fee than for non US customers, not sure if that is still true though.”

    The Dutch case wouldn’t affect what FIs in other EU countries do. An EU court ruling would be needed for it to be made applicable in all Member States, no?

21. We need a case to be brought in a Member State country, against the MS government; we need the case to be lost at national level and taken to the EU Court; and we need the case to be won in the EU Court.

    All very expensive, alas.

22. heidi –

    Plaxy
    “European Commission allowed the United States to impose their citizenship onto EU citizens to enforce their fiscal laws extraterritorially, so the Commission should pay for the consequences of its actions.”

    The EU has not entered into any treaty or relationship as to the nature under which the US can or cannot influence the way it chooses to award the citizenship of its nationals.
    It has however agreed to an illegal non treaty (non ratified by congress) FATCA agreement with the US which certainly should be re assessed.

    That was duality’s comment you replied to, not mine.

    I don’t think the EU has agreed to anything in relation to FATCA has it? The IGAs are bilateral treaties. The EU Commission could require the countries to make changes to avoid discrimination. BUT so far has taken the position that the IGAs don’t break EU law. No reason the EU Commission should care whether they break American law.

23. @Plaxy I think:-)
    No, but every EU country to a T has signed a bilateral treaty and therefore the EU as a whole has agreed to Fatca and it discriminatory policies.
    Did they understand what they were doing, I doubt it. We have asked that question time and time again. Would they have done anything different if they had? I doubt it.

    I remember some years ago my kid was applying for college. One of the short essay questions was something like
    “What are the moral and ethical questions you ask yourself when you are confronted with a problem in which others may suffer from the consequences”?
    We discussed it briefly before he put pen to paper and apart from the first that sprang to mind, ‘do unto others as you would wish done unto yourself,’ another that came up was ‘ if harm was unavoidable, then should you take the route of the least amount of harm, or should you take the route of what you feel is right regardless? This I think has always been a ethical dilemma and I believe may prove to be so in the argument the governments may use in protecting the banks and their economies versus the US person account holders. They will say that Americans have the right to renounce. I do not agree with this, just saying this may well be their argument.

24. Accord between Unia and a bank to terminate a lawsuit claiming discrimination based on nationality.

    https://www.unia.be/en/articles/accord-between-unia-and-a-bank-to-terminate-a-lawsuit-claiming-discrimination-based-on-nationality

    Funny because though I did not know of the complaint, DB dumping me unceremoniously in 2014 was the basis of my discovery of FATCA. I corresponded with them and they wrote back, quite clearly, that the reason was my US birthplace, although I live here as an EU citizen.

    To cite the article: “The bank then voluntarily decided to revise its position and agreed, starting from 1 March 2016, to once again offer the “US Persons” customers the same services they had received prior to the termination in 2014, under the same conditions. The bank confirmed that its change of policy would not only apply for the plaintiffs and the former customers whose accounts had been closed, who would thus be able to open new accounts, but also for any new “US Persons” customers in the future.”

    It is almost (or even most) unfortunate that this matter was thus resolved by UNIA, a largely unknown Belgian agency whose purpose is to fight discrimination. Having the case move through the courts and ultimately to the European Court of Justice would have been more helpful for us, I believe. However I think Belgium is so tightly regulated and full of red tape and international anyway that FATCA is just another administrative thing for banks, and having US customers is just something they are ready to deal with now. I cannot vouch for this personally however because I have not opened any accounts since 2014 (not in my own name anyway — 😉 ). Nevertheless it makes the claim that “we cannot even open a bank account” less credible here.

    So, in this case the EU was never consulted. It’s quite possible that even if the case had moved to Belgian courts (gobbling up about 6 years to wind through them) the courts would have ruled against the discrimination. And it’s unlikely a bank would have then appealed to the ECJ in order to be able to continue to cast off USPs.

    So from this and from some EU hearings shown here previously, it appears that the EU has been able to steer clear of the matter. The US was smart to negotiate individual IGAs, and the EU will try to leave it that way.

    Things would be entirely different if the EU itself had been called by member states to negotiate for the bloc. The notorious EU bureaucracy is particularly efficient and staffed with a true bureaucratic elite, in my view. It’s very well paid, very interesting work, and they are highly selective of their hires. Just ask Microsoft and Google and Amazon, companies with no shortage of aggressive lawyers and lobbyists, and also see the sad Brexit negotiations where Britain is finding it is basically only allowed to say Amen, and “Merci” and “Danke” to EU demands.

    The EU would have forced the US to set up data protection (would have bombarded them with 2000 pages of technical and ethical guidelines — which the IRS would probably not even have the staff to read through, much less understand) and true reciprocity. And it probably would have obtained preferential status for EU citizens living in the EU, regardless of US personhood, birthplace, etc.

25. @plaxy

    “The Dutch case wouldn’t affect what FIs in other EU countries do. An EU court ruling would be needed for it to be made applicable in all Member States, no?”

    Couldn’t cases be referred to the European Court of Justice? I am by no means an expert in law. Notwithstanding the Dutch ruling, Fatca is still alive and well in the Netherlands. Is there something I don’t get in all of this?