Amsterdamse gracht

Foreign Account Tax Compliance Act (FATCA)

The Foreign Account Tax Compliance Act is an American law that focuses on identifying U.S. persons who hold an account or financial assets outside the United States. It requires foreign financial institutions (FFIs) to report assets and accounts held by U.S. citizens and certain U.S. residents. This tax law is called FATCA, in short.

Why does the FATCA exist?

The law aims to prevent tax evasion by Americans in other nations. The legislation is implemented in the Netherlands and requires all financial institutions to identify their U.S. customers. Additionally, they must pass on information about the identity and assets of American customers to the Dutch tax authorities.

The Dutch tax authorities (Belastingdienst) will exchange information with the United States’ tax authorities (known as the IRS).

Is there a European equivalent of the FATCA?

In Europe, we have the so-called Common Reporting Standard, CRS in short. The CRS follows the introduction of the States Foreign Account Tax Compliance Act and serves as an international agreement to exchange information about bank accounts. The CRS fights tax evasion and should facilitate cross-border tax transparency on financial accounts held abroad.

From January 2016, financial institutions -such as banks- have been required to determine where their customers are taxable.

What if I don’t comply with the FATCA?

If you ignore this legislation or don’t comply with it, you might receive:

  • A fine by Dutch tax authorities
  • A withholding tax of 30% that comes directly or indirectly from your United States (source) income
  • More difficulties when complying with FATCA in the future

Be smart, be tax compliant

Meeting the requirements for the FATCA can be quite the hassle. A trustworthy partner can be of service whilst finishing your compliance. Our tax experts have broad experience with FATCA compliance and already assisted a wide range of financial parties, banks, insurers and entrepreneurs with their compliance.