The US Foreign Account Tax Compliance Act ("FATCA") will come into force on 1 July 2013. In sum, FATCA determines that all financial institutions worldwide will have to pass information about US clients to the US tax authorities. US authorities claim that information about funds held by all 'US persons' will enable the US to counter tax fraud. Failure to cooperate may result in hefty fines.
The G5 - Germany, France, Italy, Spain, and the UK – agreed on a Joint Statement with the US in February 2012 that will ensure better international tax compliance and faster and easier implementation of FATCA. This can be achieved by automatic exchange of information on a reciprocal basis under the existing bilateral tax treaties and by using a joint approach with regard to the supply of data to the authorities of the FATCA partner country.
Early in March the State Secretary of Finance indicated his willingness to join this arrangement. FATCA is expected to have a considerable effect on the Dutch financial sector. By joining the arrangements the Dutch government aims to reduce the cost to Dutch financial institutions. Notably, FATCA may give rise to issues with EU data protection rules. In April 2011, the European Commission made a proposal on behalf of the Member States to accommodate FATCA's requirements. The Commission also proposed a drastic reform of data protection regulations on 25 January 2012. Those proposals have been sent to the European Parliament and the EU Member States for consultation.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.