NL Ministry of Finance updates Accidental Americans FAQ

31/10/23

On 4 October 2023, the Dutch Ministry of Finance updated its Q&A guidance on Accidental Americans in the context of FATCA reporting. Accidental Americans are those who were born in the US or to US parents but who do not keep any other significant ties with the US. The publication (only in Dutch) addresses some of the most contentious aspects of the relationship between the so-called Accidental American and their banks. The update provides extra information on how to avoid account closure after the Internal Revenue Service (‘IRS’) released Notice 2023-11 in January 2023.

Background

The entry into force of FATCA required financial institutions, such as banks, across the globe to provide information on their US customers. The information exchange requires, among others, providing the customer’s US Tax Identification Number but Accidental Americans generally do not have one. Financial Institutions did not want to be seen as non-compliant by the US authorities and decided to limit their relationship with those Americans that could not provide a TIN, by closing accounts and/or refusing to open new accounts.

The Dutch guidance document was initially published in July 2021 and includes explanations on how to apply for a US TIN or a Certificate of Loss of Nationality (‘CLN’), as well as touching upon other relevant aspects such as double taxation and data privacy concerns. The recent update provides additional information on how to avoid account closure after the Internal Revenue Service (‘IRS’) released Notice 2023-11 in January 2023.

Relief from the information exchange

Accidental Americans have been resorting to the courts to defend their rights, forcing the EU governments to maintain negotiations with the US Authorities to find a suitable solution for both Accidental Americans and Financial Institutions. These negotiations materialised in IRS Notice 2023-11 which gives Financial Institutions the possibility to report TIN dummy codes in the absence of a real TIN, avoiding non-compliance with FATCA reporting obligations and allowing Accidental Americans to maintain their accounts.

The relief is applicable to all pre-existing bank accounts (those opened before 30 June 2014) on the condition that the bank continues contacting their Accidental American customer base to obtain a US TIN or CLN. Similarly, new bank accounts (those opened after 30 June 2014) that are above the USD 50,000 threshold by 31 December can also benefit from this exception, but in this case it is up to the client to demonstrate that they have applied for a TIN or CLN to maintain their bank account. New accounts under USD 50,000 by 31 December of the relevant year, are excluded from FATCA reporting.

What does this mean for your organisation?

Financial Institutions in the Netherlands should be aware that these exceptions will remain in place up to and including reporting year 2024. The situation of Accidental Americans has been on the table since the entry into force of FATCA, and the debate is still ongoing.The relief provided by the IRS is however temporary. In this sense, recent GDPR judicial developments in Belgium have questioned the overall compliance of FATCA with GDPR standards, which foreshadows some relevant updates in the near future.