EU parliament versus FATCA

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Following the worldwide implementation of the Foreign Account Tax Compliance Act (FATCA) – a reporting regime that obliges financial institutions to disclose certain financial information on their US customers – thousands of law-abiding EU residents realised that they were subject to tax obligations in the US, whereas they thought they had no ties with the US. These so-called ‘Accidental Americans’ could be anyone with an American parent who inherited US citizenship but was born outside the US, or people of other nationalities who happened to be born in the US and who stayed there only a few weeks or months and maintained no ties whatsoever to the US. The US is one of only two jurisdictions in the world that has a taxation system based on citizenship (with Eritrea), as opposed to the domicile and residence concepts which are seen in many other jurisdictions.

These ‘Accidental Americans’ who are residing in or are citizens of the EU, suffer adverse effects as a result of FATCA, such as having their savings accounts frozen and being denied access to banking services due to the reluctance of financial institutions to follow costly FATCA reporting.

Further to a petition submitted by a ‘Collective of European citizens who are either “Accidental Americans” or dual European/US citizens Association of Accidental Americans’, on 5 July 2018 the European parliament adopted a resolution on the adverse effects of FATCA on EU citizens and in particular ‘Accidental Americans’.

In this resolution, the EU parliament acknowledge the difficulties encountered by the EU “Accidental Americans” and calls on Member States and the Commission to ensure that the fundamental rights of all citizens, in particular those of ‘Accidental Americans’ are guaranteed. Furthermore, the EU parliament also raised other concerns, such as the fact that although most of the intergovernmental agreements (IGAs) negotiated with the US are theoretically reciprocal, it seems the Internal Revenue Service (IRS) has not been systematically reporting information on EU taxpayers having financial assets in the US, albeit most of the IGAs have now been in force since 2014.

In the context of the gradual shift from banking secrecy to the globalisation of tax transparency over the last decade, the EU parliament is now raising certain concerns over the effects of the implementation of FATCA within the EU, and in particular its lack of bilateral transparency.

To understand more about FACTA, how it affects Americans overseas and what the EU is doing to try and eliminate this unnecessary policy of impurging on the privacy and rights of Americans and Europeans alike by forcing Washington to retract this, please continue to read this article by clicking on the link below….

Source: EU parliament versus FATCA