Banks must close accounts of ‘accidental Americans’ by end of year

Summary

The deadline of America’s Fatca regulation is looming, with those who have not reported the information needed to local banks looking at losing their accounts

Record numbers giving up US citizenship

Many Belgians born in the US are running into banking problems because of their status as “accidental Americans”. As a reporting deadline looms, local banks are racing to get the paperwork in order for thousands of customers.

In 2010, the US approved the Foreign Account Tax Compliance Act (Fatca), which requires all foreign banks to report accounts held by American citizens. The banks must comply by 1 January 2020 or risk sanctions, including a withholding tax of 30% of certain payments coming from the US.

Banks around the world have struggled with the requirements of Fatca and argued that the cost of implementing a reporting programme outweigh the sanctions. Some banks responded early by simply kicking out their American customers – Deutsche Bank being one example with branches in Belgium.

“The goal of Fatca was to prevent American citizens from committing tax fraud by hiding accounts overseas,” Francis Adyns of Belgium’s federal finance agency told VRT. Belgium’s approach to Fatca is to have banks request needed information from Americans with accounts. They report that information to the federal government, “and the government then sends it through an automated system to US tax authorities”.

Non tax-compliant

Because the figures are being reported to America’s tax agency, the IRS, Americans living outside the country have been forced to become tax compliant. The US is the only country in the world besides Eritrea to require its citizens to file a tax return if they live and earn all income overseas.

Many Americans didn’t realise this and had not filed a tax return for years, forcing them to pay accountants thousands of euros in order to get tax compliant. Getting compliant requires three years of back taxes, as well as the need to file every year.

Dual citizenship doesn’t help; even if Americans obtain Belgian nationality, they are still also Americans. Over the past few years, record numbers of people have taken the step to give up their American citizenship in order to avoid filing a tax return.

We are required to do this by law, we can’t get around it

- Isabelle Marchand of Febelfin

However, the situation is also affecting Belgian citizens who are “accidental Americans”. That means they were born in the US, usually to Belgian parents, but moved to Belgium when they were children.

Having been born in America, these Belgians are technically still Americans and, unbeknownst to them, were supposed to have filed a tax return in the US every year, once they started earning salaries. They are finding out now that they are not tax-compliant.

While these Belgians can provide the bank with almost everything they need, they do not have a US Social Security Number. They can jump through the hoops to get one, but then the IRS is tipped that they have never filed a tax return. Giving up American citizenship, meanwhile, means being tax compliant for at least five years and paying a fee of €2,125.

In the meantime, Belgian banks must be able to report all the information required by 31 December or close the accounts of those involved. “We are required to do this by law, we can’t get around it,” said Isabelle Marchand of the financial sector federation Febelfin. “If the customers cannot submit the necessary information, than the banks must shut down their accounts.”

According to the country’s statistics bureau, there are 10,793 Americans currently living in Belgium. But that does not include those with dual nationality or accidental Americans. The number of those Belgians is not known.

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