FATCA and the EU

546 thoughts on “FATCA and the EU”

1. Duality –

   Some banks I looked at do not appear to provide “basic payment accounts” per se.

   The PAD doesn’t require Member States to require every bank to offer a basic payment account: in my country, nine banks are required to do so.

   Those who do will have to follow their due diligence by asking for either a CLN or an SSN from affected Europeans. If you have neither, then no payment account.

   If you can find a bank that offers basic bank accounts but rejects an application from a USC who meets the PAD eligibility criteria but who has no US TIN, Bob is your non-PAD-compliant uncle. Report the refusal to your bank regulator, your MP, your MEPs, and maybe Ms in’t Veld. See what they say. That would be very interesting.

   I doubt that the Directive can “guarantee” a basic payment account to US-born Europeans, given the requirements posed by the IGAs. Something has to give way…

   The Directive requires Member States to make sure basic bank accounts are available; there’s no conflict with the IGAs. The banks that offer basic bank accounts have to make sure their terms and conditions don’t exclude eligible applicants. Not being born in the US is not a requirement.

   As I say – if you can find a bank that’s breaching this out of FATCA fear – excellent.

2. Access to bank accounts

   The law says that anyone residing legally in the European Union has the right to open a payment account with basic features in any EU country. However, a person wishing to open such a bank account should always comply with EU anti-money laundering rules.

   A basic bank account includes various services such as cash withdrawals at a bank counter or cash machines and the execution of payment transactions such as direct debits or credit transfers within the EU.

   http://eur-lex.europa.eu/legal-content/en/LSU/?uri=CELEX:32014L0092

3. Comment from 2013, when the proposal to require access to basic banking had just been put forward:

   Unbanked abroad

   Thursday’s proposal to require the provision of banking services could … reverse a worsening banking situation for American expats after the passage of the U.S. Foreign Account Tax Compliance Act, or FATCA. The law, which mandates that foreign banks regularly disclose data on their U.S. clients or face withholding taxes on payments leaving the United States, has prompted some European institutions to circumvent the problem altogether.

   Rather than overhaul their due diligence programs and account opening procedures to comply with FATCA, several EU banks have chosen to close any account they maintain for U.S. citizens, said Ranson.

   “The implications of FATCA are so far reaching that many individual banks prefer not to enter in a contractual relationship with American customers,” she said. The problem may be short-lived because an expected global plan on financial data exchanges [CRS] will impose similar requirements on clients, mitigating the pressure to single out American customers, said Ranson.

   http://www.ospfmon.com/2013/12/eu-proposal-would-require-banks-to.html

4. @SophieintVeld Member of EU Parliament:

   Taxation without representation?… Impact of US Tax Policies on EU citizens and businesses #FATCA #GILTI @ACAVoice #accidentalamericans
   Questions to EU Commission and Council by @SophieintVeld and @TCornillet @ALDEgroup

   https://twitter.com/SophieintVeld/status/960886285002051584

5. With the ink still drying on a sweeping reform of the US international tax system, academics, economists, government officials, and tax practitioners gathered in Washington at a February 2 conference to offer suggestions on how to replace or revise the new law.

   Discussion at the conference, which was co-sponsored by Georgetown Law’s Institute of International Economic Law (IIEL) and the International Tax Policy Forum (ITPF), also focused on how the US might use the new law’s base erosion and anti-abuse tax (BEAT) provisions, specifically the BEAT’s impact on foreign banks, as leverage in negotiations with the EU on the taxation of US tech companies.

   Paul Oosterhuis, Skadden, Arps, Slate, Meagher & Flom LLP, said the 2017 Tax Cuts and Jobs Act (TCJA) should be viewed as the first step of a multi-step legislative and regulatory process, which could take 3–5 years to complete.
   [..]
   Mike Williams Director, Business and International Tax, at the UK’s HM Treasury, noted that when the UK moved from a worldwide to a territorial regime, it did not enact the legislation all at one time. After adding its new dividend exemption system, the UK followed up with controlled foreign company changes, and, later, the foreign branch exemption rules were added, Williams said.
   [..]
   Oosterhuis said that the next round of US international tax reform could come fairly quickly. He noted that President Trump reportedly mentioned at a February 1 Republican retreat in West Virginia that he might like to undertake a further tax reform focusing on savings, retirement, and similar issues.

   “We could certainly have the second generation of international reform be part if that.”

   https://mnetax.com/experts-consider-next-round-us-international-tax-changes-using-beat-leverage-eu-tech-tax-negotiations-25866

6. FATCA is increasingly resulting in EU citizens being excluded from basic banking services.

   http://sophieintveld.eu/concerns-about-impact-of-us-tax-reform-on-eu-citizens-and-businesses/

   There don’t actually seem to be any reports of this happening at all, let alone at an increasing rate.

   I’ve seen reports of USCs being threatened with account closure, by banks hoping to avoid the IGA compliance costs; that’s history, since CRS now means that all
   banks have AEOI compliance costs.

   I’ve seen complaints from USCs about not being eligible for certain types of accounts; but not basic accounts.

   I’ve complained myself, as a former USC, about having to produce the CLN because of birthplace.

   But I haven’t seen anyone reporting that they’ve applied for a basic bank account and been refused on the grounds of US citizenship.

   FATCA is bad enough; asserting that it causes problems that it doesn’t cause, risks giving rise to scepticism about the harm it actually does cause.

   Banks probably don’t like having to provide basic bank accounts, but that’s because the people who apply for basic bank accounts don’t tend to have much money. Same as it ever was.

7. From FATCA to CRS, or, Why the EU Commission is unlikely to take action against the FATCA IGAs unless required to do so as a result of an ECJ ruling.

   2012 G5 – US Joint Statement:

   . …the United States, France, Germany, Italy, Spain and the United Kingdom have agreed to explore a common approach to FATCA implementation through domestic reporting and reciprocal automatic exchange and based on existing bilateral tax treaties.

   2013 G20 Finance Communique:

   welcome progress made towards automatic exchange of information which is expected to be the standard and urge all jurisdictions to move towards exchanging information automatically with their treaty partners, as appropriate. We look forward to the OECD working with G20 countries to report back on the progress in developing of a new multilateral standard on automatic exchange of information, taking into account country-specific characteristics.

   http://www.g20.utoronto.ca/2013/2013-0419-finance.html

   Following the G20 communique, “the G8 Presidency requested a report from the OECD to analyse how jurisdictions could build on the recent developments to implement automatic exchange in a multilateral context. It invited reflections on specifications for the information to be exchanged, the legal basis for the exchange and consideration of the necessary platform to exchange the information.

   The OECD report identified three legal bases:

   With more and more jurisdictions joining the Convention on Mutual Administrative Assistance in Tax Matters there exists a clear legal basis for comprehensive automatic exchange with strict safeguards protecting confidentiality. Bilateral tax treaties also provide such a legal basis and within the European Union, Directives provide a specific legal framework for automatic exchange of information regarding interest income and certain other types of income between its 27 (soon 28) members.

   The OECD report accordingly proposes “USING RECENT BILATERAL AGREEMENTS TO ADVANCE TOWARDS A STANDARDISED MULTILATERAL MODEL.”

   http://www.oecd.org/ctp/exchange-of-tax-information/taxtransparency_G8report.pdf

8. Though FATCA appears on the surface to be the outlier, it’s actually the facilitator, allowing the global implementation of automatic exchange deriving its legal basis (in most countries and to a very large degree) on the US double-taxation treaty with its saving clause and mutual assistance articles.

   IMO. ICBW. ETC.

9. @plaxy

   “I’ve seen complaints from USCs about not being eligible for certain types of accounts; but not basic accounts.”

   Imagine relying on a “basic account” for life. A bit plebeian for some of us. So much for dividends and capital gains…

10. Exactly. Access to basic accounts is not the problem, for USCs post-FATCA. But that’s the only kind of account that’s guaranteed by the EU.

    Beyond basic payment accounts, it’s treated as a matter purely of bank policy.

    A deliberate strategy, to get the IGAs (and subsequently CRS) up and running without encountering legal challenges.

    It has been remarkably, depressingly successful, in that regard. Less so, apparently, in its avowed aim of reducing tax evasion.

11. @plaxy

    “Access to basic accounts is not the problem, for USCs post-FATCA. But that’s the only kind of account that’s guaranteed by the EU.”

    Well, as said previously, assuming the bank does not request an SSN or a CLN. In any case, I wouldn’t open a “basic account” because I want to be treated like every other European national who desires a proper payment account along with other financial products (especially someone of my background). Meanwhile, the European Commission have done nothing to protect my financial freedoms… absolutely nothing. As long as affected Europeans remain reactive to FATCA, then AEoI (as it stands) cannot be considered finalised. No one is complaining about CRS unless you have something to hide (though mass data breach is a possible problem). I see all of this as work in progress…

12. Duality – “I want to be treated like every other European national who desires a proper payment account along with other financial products ”

    Don’t we all. I tried to explain that to my MP but it cut no ice.

    “the European Commission have done nothing to protect my financial freedoms… absolutely nothing.”

    Because the only financial freedom the EU guarantees is the right to a basic account.

    They’ve been through all this with an army of lawyers. They wouldn’t have built CRS on the IGA foundation if they had any doubts about the legal basis (IMO).

    If anyone does find a way to the ECJ I’ll be cheering and supporting. Meanwhile, renunciation remains the best available solution, IMO.

13. With regard to the bank requesting SSN, even for a basic account – yes, under CRS banks are required to get a TIN from anyone who’s tax-resident in another country.

    There was a brief window, between the implementation of the IGAs and the implementation of CRS, when only USCs were asked for TIN. Possibly an anti-discrimination suit could have succeeded at that time, but CRS quickly arrived on the scene and applied the question to all, removing the discrimination.

14. @plaxy

    “…but CRS quickly arrived on the scene and applied the question to all, removing the discrimination.”

    It’s a smoke-screen to disguise the discrimination; however…

    Asking someone who is resident elsewhere for a TIN is not discriminatory.

    Asking someone who is born elsewhere for a TIN is discriminatory.

15. The due diligence question about birthplace continues to be discriminatory (in my view). Who knows what the ECJ would decide.

    As far as I can see, asking for the TIN is not discriminatory now that CRS is in place, because they’ve hooked it onto tax-residence, not birthplace.

    That said, if it were to come before the ECJ and be ruled discriminatory, that would be great.

16. ‘Mishcon De Reya Says Common Reporting Standard A “Disaster Waiting To Happen” ’

    http://www.wealthbriefing.com/html/article.php?id=177888#.Wn4cJqKnzYU

    The Common Reporting Standard (CRS) regime – covering 102 countries but not the US – raises serious risks for financial privacy and creates the danger that information will fall into the wrong hands, a prominent law firm has recently warned.

    The report, The Big Debate: Transparency Versus Privacy – Common Reporting Standard and Beneficial Ownership Registers, by Filippo Noseda, and published by Mishcon de Reya, argues that the CRS could see millions of individuals with cross-border financial lives have their data put at risk.

    “Privacy and data protection are not a luxury. They are an integral part of any democratic society,” Noseda writes in a section of the report entitled “A Disaster Waiting To Happen”. Noseda said the rules are so complex that it is unlikely politicians understand it. The CRS regime is democratically unaccountable, he said.
    [..]
    “Once one cuts across the drafting complexities of the CRS, its underlying problem is extremely simple – the CRS requires the exchange of sensitive personal and financial information to foreign tax authorities on a generalised basis without any limitations and, in particular, without considering any actual risk of tax evasion. If you have an account in a foreign country, you will be subject to reporting, probably via more or less secure electronic communication between governments,” he said.
    [..]
    “The foreword to the CRS makes it abundantly clear that the new global system of automatic information exchange has been devised by unelected officials with input from ministers and central bank governors and then submitted to the European Parliament as well as national parliaments for adoption and implementation. Given the phenomenally complex nature of the provisions contained in the CRS, it is unlikely that many parliamentarians will have grasped the underlying data protection issues…” [GCHQ said]

17. “The intrusive Common Reporting Standard will only be curbed if someone is prepared to sacrifice their own privacy in a test case to assert the right to privacy for everyone, according to a partner at British law firm Mishcon de Reya.”

    https://international-adviser.com/common-reporting-standards-conflict-data-human-rights/

    It seems Mishcon de Reya is being sued by a former client over a £6m tax bill. It would be interesting to know if CRS had an impact on that bill.

18. @plaxy

    “It would be interesting to know if CRS had an impact on that bill.”

    Personal data should not be transmitted for the sake of exchanging information; there needs to be a genuine reason to do so. (What ever happened to our European data protection laws?) With AEoI in its current form, everyone is presumed to be guilty until proven innocent. Unfortunately, CRS has been pieced together by unelected supranational authorities.

    Even if we had not 100% but 110% tax compliance worldwide, no government would ever be satisfied and would embark on another round of wealth destruction.

    These are scary times…

19. Duality: “Personal data should not be transmitted for the sake of exchanging information; there needs to be a genuine reason to do so. ”

    Absolutely.

    If Mishcon de Reya’s clarion “call for clients” succeeds in bringing forth a good case, CRS could be in trouble about that.

    And if – big if – the court were to rule American-style John Doe “catch’em all and throw away the small fry” tactics not permissible in EU law, then the IGAs could also be in trouble.

    Have to wait and see.

20. @plaxy

    “If Mishcon de Reya’s clarion “call for clients” succeeds in bringing forth a good case, CRS could be in trouble about that.”

    Perhaps it is time to focus on this front.

    Bulk transfer of personal data under Safe Harbour was struck down outright by the ECJ. I cannot see why this would not apply to the (illegitimate) IGAs as well as the CRS. “Tax evasion” is becoming a new cliché…

21. Israel’s Supreme Court has ruled on both the discrimination issue and the privacy issue.

    http://isaacbrocksociety.ca/fatca-and-israel/comment-page-1/#comment-8145088

    I’ve always thought the discrimination issue was FATCA/IGA’s weakest point: FATCA treats USC residents of EU Member States worse than non-USC residents of EU Member States. Seems pretty obvious.

    It turns out there’s another way to look at it:

    The petitioners argued that the Amendment Law harms the right to equal treatment as it subjects US account holders to a different legislative system from that which applies to the rest of taxpayers in Israel.
    [..]
    Melcer rejected the claim that US account holders were discriminated against in comparison with those not subject to the reporting requirements. In his view, the information sharing with US tax authorities increases equal application of tax obligations, thereby eliminating the distinction between taxpayers who paid tax and those who evaded their tax obligations.

    In other words, comparing non-compliant USC taxpayers to compliant USC taxpayers.

    Would the ECJ take a similar view, if a FATCA discrimination suit got that far? It surely could; I for one suspect that it probably would.

22. Forgot to close the blockquote. I’ll try again.

23. plaxy says
    February 18, 2018 at 4:32 am
    Israel’s Supreme Court has ruled on both the discrimination issue and the privacy issue.

    http://isaacbrocksociety.ca/fatca-and-israel/comment-page-1/#comment-8145088

    I’ve always thought the discrimination issue was FATCA/IGA’s weakest point: FATCA treats USC residents of EU Member States worse than non-USC residents of EU Member States. Seems pretty obvious.

    It turns out there’s another way to look at it:

    The petitioners argued that the Amendment Law harms the right to equal treatment as it subjects US account holders to a different legislative system from that which applies to the rest of taxpayers in Israel.
    [..]
    Melcer rejected the claim that US account holders were discriminated against in comparison with those not subject to the reporting requirements. In his view, the information sharing with US tax authorities increases equal application of tax obligations, thereby eliminating the distinction between taxpayers who paid tax and those who evaded their tax obligations.

    In other words, comparing non-compliant USC taxpayers to compliant USC taxpayers.

    Would the ECJ take a similar view, if a FATCA discrimination suit got that far? It surely could; I for one suspect that it probably would.

24. Sigh. Try again.

    Israel’s Supreme Court has ruled on both the discrimination issue and the privacy issue.

    http://isaacbrocksociety.ca/fatca-and-israel/comment-page-1/#comment-8145088

    I’ve always thought the discrimination issue was FATCA/IGA’s weakest point: FATCA treats USC residents of EU Member States worse than non-USC residents of EU Member States. Seems pretty obvious.

    It turns out there’s another way to look at it:

    The petitioners argued that the Amendment Law harms the right to equal treatment as it subjects US account holders to a different legislative system from that which applies to the rest of taxpayers in Israel.
    [..]
    Melcer rejected the claim that US account holders were discriminated against in comparison with those not subject to the reporting requirements. In his view, the information sharing with US tax authorities increases equal application of tax obligations, thereby eliminating the distinction between taxpayers who paid tax and those who evaded their tax obligations.

    In other words, comparing non-compliant USC taxpayers to compliant USC taxpayers.

    Would the ECJ take a similar view, if a FATCA discrimination suit got that far? It surely could; I for one suspect that it probably would.

25. At last.