In the Committee on Petitions (PETI) of the European Parliament complaints by three victims of the unlawful extraterritorial legislation of the U.S., FATCA, are dealt with.

PETI published a notice to members with a summary of the complaints and the information provided by the European Commission, the latest is of 15 February 2022 (page 5-7):

6. Commission reply (REV III), received on 15 February 2022
Petitions 1088/2016, 1470/2020 and 0323/2021

Following its meeting on 10 November 2020, the Committee on Petitions requested an updated reply, especially in view of the recent United States (US) elections and new US administration. The Commission is also providing an update in view of the Committee on Petitions meeting of 2 September 2021.

On 8 December 2020, the German Presidency of the Council of the EU wrote a letter to the US administration (Internal Revenue Service (IRS)) on the Foreign Account Tax Compliance Act (FATCA).

This letter (which is publicly accessible) can be found under the following link: https://data.consilium.europa.eu/doc/document/ST-13977-2020-INIT/en/pdf

In its letter, the German Presidency stressed that, in spite of the relief measures taken thus far by the US authorities as regards individuals with US nationality wishing to relinquish their US nationality (measures previously reported by the Commission services to the Committee on Petitions), EU citizens with US nationality are still experiencing concrete difficulties (e.g. complex procedures and high renunciation fees – around 2 300 US dollars). Contacts between the EU Presidency and the US administration continued under the Portuguese Presidency. A meeting between the Presidency and the US IRS took place on 25 March 2021.

On 16 September 2021, the US IRS replied to the letter referred to above, indicating its willingness to better understand the circumstances under which Foreign Financial Institutions (FFIs) are not able to report a taxpayer identification number (TIN). The IRS indicated that such information would allow the US administration to give further consideration as to whether additional measures could be taken to encourage TIN reporting, and whether additional relief could be provided to FFIs or US taxpayers resident abroad.

The Commission’s observations

Contacts between EU institutions and the US administration on FATCA are ongoing. FATCA was, in particular, discussed by the Commission services with high-level representatives of the US administration at the EU-US Joint Regulatory Forum on 24-25 March 2021 and again on 29-30 September 2021 at which the US administration stressed its willingness to cooperate with the Commission to find mutually acceptable solutions to the problems presented by the Commission services. The Commission services had in particular highlighted the impact of FATCA on the accessibility, by ‘accidental Americans,’ to basic financial services such as a bank account. The Commission services will now follow up on the US administration’s invitation to cooperate.

The US IRS updated in May 2021 its frequently asked questions (FAQs) on general issues of FATCA. The updated FAQs provide information for Model 1 FFIs that are required, but have not been able to obtain and exchange the US TIN for each specified US person that is an account holder or a controlling person of a non-US entity.

The updated FAQs, dated 13 May 2021, include a new question (Q6), in the Reporting subsection of the FAQs. Q6 lists a series of codes that may be used by a reporting Model 1 FFI to populate the TIN field where the TIN has not been obtained in specified scenarios. The use of these codes is not mandatory but is expected to help the IRS better understand the facts and circumstances behind the missing TINs, and therefore assess the compliance of the FFI with its reporting obligations.

When one of the codes is used, the IRS system will generate an error notification to indicate that the entry is invalid. The error notification will provide 120 days to correct the issue by providing the TIN. If the TIN is not provided within 120 days, the IRS will evaluate the data received and determine through a consideration of facts and circumstances whether there is significant non-compliance. Such facts and circumstances include:

– reasons why the TIN could not be obtained;
– whether the FFI has adequate procedures in place to obtain TIN; and
– efforts made by the FFI to obtain TINs.

These changes go in the direction expected by the Commission regarding ways to address the difficulties in reporting the US TIN by the FFIs.

As regards data protection, the European Data Protection Board (EDPB) issued a statement [1] on 13 April 2021 in which it recalls the principles enshrined in Article 96 of the General Data Protection Regulation (GDPR) [2] and Article 61 of the Law Enforcement Directive (LED) [3], according to which existing international agreements involving international transfers of personal data which comply with Union law as applicable prior to the entry into force of the Regulation or Directive remain in force until amended, replaced or revoked.

The EDPB considers that, in order to ensure that the level of protection under the GDPR and the LED is not undermined when personal data is transferred outside the Union, consideration should be given to the aim of bringing these agreements in line with the GDPR and LED where this is not yet the case.

On that basis, in the same statement, the EDPB invited Member States to assess and, where necessary, review their international agreements that involve international transfers of personal data, such as those relating to taxation (e.g. to the automatic exchange of personal data for tax purposes) to determine whether further alignment with current EU legislation, case law and EDPB guidance might be needed.

As also indicated in the EDPB statement, national data protection authorities, as the enforcers of the data protection rules, have an important role in providing assistance and advice to Member State authorities in this context.

Conclusion

The Commission services are in frequent contact with the Member States, the EU Presidency and the EDPB on this file. Contacts are also held with European banks to ensure access to a basic bank account by, in particular, EU citizens also possessing US nationality. The Commission views this file with utmost importance and will continue to inform the Committee on Petitions of any progress made, following in particular the discussions held at the Committee on Petitions meeting of 2 September 2021.

 

[1] Available at:

https://edpb.europa.eu/system/files/2021-04/edpb_statement042021_international_agreements_including_transfers_en.pdf .

[2] Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC (General Data Protection Regulation) (Text with EEA relevance), OJ L 119, 4.5.2016, p. 1–88.

[3] Directive (EU) 2016/680 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data by competent authorities for the purposes of the prevention, investigation, detection or prosecution of criminal offences or the execution of criminal penalties, and on the free movement of such data, and repealing Council Framework Decision 2008/977/JHA, OJ L 119, 4.5.2016, p. 89–131.