NETHERLANDS: Dutch government takes action on Fatca.

As published on international-adviser.com, Wednesday 25 November, 2020.

Dutch finance minister Wopke Hoekstra said the government is taking control of the problems of ‘accidental’ Americans and the issues they face with bank accounts.

So-called ‘accidentals’ are people who acquired US citizenship by either being born in the States or by having one parent who is a US citizen.

Hoekstra told the Dutch Lower House he has been in talks with several banks in the country, as well as the Dutch Banking Association (NVB), to offer more flexibility to the people caught up in the matter.

Problems stem from the fact that US nationals abroad are subject to the Foreign Account Tax Compliance Act (Fatca) which requires them to pay tax on their foreign income to the Internal Revenue Service (IRS).

This is because the US is one of two countries in the world to have a citizenship-based taxation system – the second one being Eritrea – compared to a residence-based one.

The legislation also requires foreign financial institutions to report information regarding their clients of US nationality to the IRS.

Many banks around the world have started declining access and applications for bank accounts to US nationals as they don’t have the tools or don’t want the burden of having to report to the IRS.

As a result, around 46,000 Dutch-US nationals could see their bank accounts closed, or be turned down when trying to open one, as they need a social security number, which requires a very difficult a long process to get, or a certificate of loss of nationality.

As a result, some have turned to renouncing their US citizenship, but that also comes at a cost. They have to pay $2,300 (£1,730, €1,940) for it, as well as being obliged to file a tax return for the last five years, for which the IRS was forced to pass a tax waiver measure last year.

Minister Hoekstra said these renouncing procedures “cannot be adapted by the Netherlands”, but the government is in regular contact with the US advocating for lower costs.

In addition, he said banks agreed to not close the bank accounts of those US nationals that are in the process of obtaining a social security number (TIN) or a certificate of loss of nationality (CLN).

Hoekstra added: “The banks involved said that they are terminating accounts of Dutch nationals, including US nationals, who have not yet taken action to obtain a TIN or CLN.

“The banks gave as a reason for terminating accounts the expiration of the US deferral scheme as of 1 January 2020, with the result that banks would have to report in cases where a TIN or CLN is missing without giving up a TIN or CLN.

“This entails the risk of being designated as significantly non-compliant by the US authorities, with potentially high penalties as a result.”

But the finance minister reassured them that any sanction wouldn’t be imposed before consulting the Dutch government first.

“If a client has explicitly stated that he or she will not request a TIN or CLN, it may happen that, after a careful process, a bank account is eventually terminated,” he added.

But for those cases, there is a “fallback option” Hoekstra said, as they will still have access to the “payment traffic” via a basic payment account.

The Netherlands, with the support of France, have already brought the matter to the EU and, after a discussion on 20 November, the presidency agreed to writing a letter to the US, which will be sent after approval from all member states.

The finance minister also urged banks to review and improve their communication to US nationals especially towards those who do not respond.

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