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Netherlands to Seek Relief for ‘Accidental Americans’

Posted on May 20, 2019

The Netherlands is sending a Dutch financial official to Washington to discuss issues affecting Dutch citizens as a result of implementation of the U.S. Foreign Account Tax Compliance Act.

Dutch Finance Secretary Menno Snel will meet with Deputy Treasury Secretary Justin Muzinich, IRS officials, and members of Congress May 21 and 22, according to a May 16 announcement by the Dutch government.

"I spoke this week with a number of Dutch people who are experiencing problems as a result of American FATCA legislation,” Snel said in the announcement. “They face high costs and hassle, even though they didn't even know they were taxable in the United States. I'm going to do my best in Washington . . . to find a solution for these people.”

Dual-citizen nationals — like those born in the United States who are now living abroad and those born abroad to at least one American parent but with no other ties to the United States — are nonetheless obligated under U.S. citizenship-based taxation to declare and pay taxes on their worldwide income. All other countries in the world, except Eritrea, apply residence-based taxation.

Snel said he plans to discuss recommendations made under a study by the Government Accountability Office that was released April 1. The study highlights problems coordinating FATCA-based requirements among U.S. agencies.

Since the introduction of the obligation for banks to report to the United States on the financial accounts of Americans abroad, concerns have been growing about dual nationals who sometimes do not realize that merely being born in the United States assigns them lifelong tax obligations. Relinquishing American citizenship has become much more expensive since the enactment of FATCA, and also requires the resolution of any prior obligations and a great deal of onerous paperwork, according to organizations representing dual nationals.

So-called accidental Americans living in the Netherlands are required to submit a U.S. tax return, for which they need a U.S. Social Security number, the Dutch government has said. Many have never had a Social Security number or taxpayer identification number, it added.

Dutch banks, and many others throughout the world, are concerned that noncompliance could lead to significant fines from the United States. This causes many banks to avoid the liability by simply refusing service to U.S. citizens.

FATCA was designed primarily to allow the United States to track down Americans hiding taxable assets abroad but has provoked animosity from other countries because it does not impose reciprocal responsibilities on American financial institutions to report the assets of other citizens to their countries of origin. The Accidental Americans Association of Europe, one of several advocacy groups, has urged the United States to modify the scope of FATCA to focus on residency to rectify the inadvertent inclusions and to avoid further animosity toward the United States.

On May 15 a French legislative committee presented to the National Assembly’s Finance Committee a report detailing the problems experienced by birthright citizens lacking other ties to the United States. The committee called on both the Macron government and the EU to request modifications to FATCA to provide relief. 

In July 2018 the European Parliament voted overwhelmingly to ask for negotiations with the United States to ensure the full reciprocal exchange of information and compliance with relevant EU laws on behalf of dual nationals from Belgium, France, Germany, Ireland, Italy, the Netherlands, Spain, Sweden, and the United Kingdom. However, the relevant agreements are bilateral and therefore are not under the mandate of the EU. 

Perhaps the most famous of the accidental Americans is Boris Johnson, the former U.K. foreign secretary now vying for the post of prime minister, who could have faced a restraining order in 2015 if he came back to the United States without resolving a tax dispute over the sale of his London residence. Johnson was born in the United States to British parents.

The recent birth of a child to the Duke and Duchess of Sussex — Prince Harry, the grandson of Queen Elizabeth II, and Meghan Markle, who has retained her U.S. citizenship — has raised questions about the tax obligations that might be inherited by the newborn, Archie Harrison Mountbatten-Windsor, who is seventh in line to the British throne. 

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