The US Treasury has met with representatives of EU financial bodies to “exchange views” regarding regulation and taxation.
One of the topics brought up during the two-day forum was the impact of the Foreign Account Tax Compliance Act (Fatca) on American citizens and dual nationals based in Europe.
It follows a letter sent by the European Council, urging the US to review its legislation, and criticising it for not adopting the common reporting standard (CRS).
The US was recently named the second most financially secretive jurisdiction in the world, according to the Tax Justice Network.
“[The representatives] discussed US tax reform as well as steps taken by the United States on matters related to tax requirements affecting US and dual EU-US citizens resident in the European Union and related reporting by financial institutions,” the US Treasury said.
Under Fatca, American citizens and their foreign institutions are bound to report any foreign accounts with at least $50,000 (£38,785, €46,309) to the Internal Revenue Service (IRS).
‘Trapped by extra-territoriality’
Fatca has significantly impacted so-called ‘accidental Americans’, who are people either born in the US and left shortly after, or who inherited citizenship from their parents.
Fabien Lehagre, president of the Accidental Americans Association (AAA) in France, told International Adviser: “I am pleased to see that the problems faced by accidental Americans are finally being addressed at a summit between the European Union and the United States.
“I hope that [US] secretary of [the Treasury] Steven Mnuchin will finally take concrete steps, as we have been trapped by the extraterritoriality of Fatca for six years now.
“He could, for example, allow accidental Americans to renounce American citizenship without having to pay $2,350.
“Many of us want to renounce but cannot because of that very high amount,” he added.
Nothing concrete yet
But many remain sceptical of what has, or will, come out of the summit.
“Whilst it’s important that they are talking, we don’t know what resolutions have come out of this meeting for double EU/US nationals who are EU tax residents, and for accidental Americans who live in the EU,” Keith Redmond, accidental American global advocate, told IA.
“Fatca is still a problem where the aforementioned populations continue to face discrimination.
“Additionally, the US is not even honouring the Fatca agreements it made, as there is no reciprocity on the US side.
“The US tax system continues to be a serious issue where the US imposes its tax code on EU tax residents,” he added.
IA contacted the US Treasury for comment but did not get a response in time for publication.
Exemption for ‘no-longer-nationals’
The IRS, however, has introduced a tax relief programme for those who managed to pay and give up their citizenship.
The Relief Procedures for Certain Former Citizens only applies to people who did not file their tax returns when they were a US citizen or resident and owe a limited amount of money to the taxman.
To be eligible, individuals need to have net assets totalling less than $2m both at the time of leaving the US and when submitting, and must have waived their citizenship after 18 March 2010.
The outstanding tax returns for the year of expatriation, and the five prior, must not exceed $25,000.
If they qualify, former US citizens will see their tax liabilities relieved and won’t face any penalties or interests.
World-wide challenges
Many Americans have been turned away when trying to open accounts abroad, as financial institutions are obliged to report their information to the IRS.
Recently, IA revealed that US banking giant Goldman Sachs, does not allow US nationals to open savings accounts with its platform Marcus in the UK for this reason.
Several people affected by Fatca have takent their cases to court.
Lehagre and the AAA have taken their bid to the European Commission, after losing in France’s top court in July 2019.
Meanwhile, a British national is fighting HM Revenue & Customs over its compliance with Fatca and two Canadians are going all the way to the country’s court of appeals to challenge the legislation.
