A recent ruling by KiFiD, the Dutch financial services complaints bureau, places more pressure on all Accidental Americans in the Netherlands.
What is KiFiD?
KiFiD is the complaints institute for financial services in The Netherlands. It provides protection to ensure consumers receive fair treatment from financial services companies in the Netherlands and it is where you can go if you have a complaint against a financial services provider in The Netherlands.
Look out for the new Black Swan Capital Essential Guide for Americans in Europe. You can find our Essential Guides here.
We know that American citizens, that is US Passport holders, and US-connected persons must ensure they are FATCA compliant by lodging a US tax return every year, including when they are living in Europe. If you are in this group, you also need to be sure that your investments are appropriately structured to be compliant with the US as well as with the country in which you live. This can also be a difficult challenge.
What is the new ruling?
The ruling was an important assessment on who can be classified as a US-connected person. They ruled that anyone that acquired a US passport by birth must comply with the Foreign Account Tax Compliance Act (FATCA).
Why is this a big deal?
The ruling means that if you don’t report to the US Internal Revenue Service (IRS) you could be considered a tax evader in The Netherlands as well as potentially in the US. This means that Dutch banks and other financial institutions could close a customer’s account if they are found in breach.
The case and how it could impact you
In this case the person was a Dutch citizen who was born in the US (and therefore had a US passport) but who had left the US as a baby. They argued that as they have never really lived in the US they did not have to register there or submit taxes.
Their conundrum now is that they either register in the US and be subject to pay tax there, for example on their house sale in The Netherlands, or don’t register and risk being labelled a tax evader with the subsequent penalties that can stretch to fines and even prison!
This ruling is considered to be quite harsh and broadens the definition of a US person, otherwise known as an Accidental American.
The key action for everyone who thinks they may have a link to the US is that they need to check their status. Are they registered in the US? Are they filing their US tax returns annually? Do they need to? Are their financial lives, including their bank accounts and investments compliant?
You can read more about being US connected here.
If this is you or if you think it could be you, you can contact us at [email protected] to get more information.