All Dutch nationals that have acquired a US passport by birth must comply with the Foreign Account Tax Compliance Act (Fatca), according to a ruling by the Dutch financial services complaint’s bureau (Kifid).
Failing to report foreign income to the Internal Revenue Service (IRS) will result in the individual being considered a “tax evader” in the Netherlands, reported local broadcaster NPO Radio 1.
Additionally, Dutch banks may have the ability to close a customer’s account if they are found in breach.
The ruling stems from the case of a Dutch national who was born in the United States but moved to the Netherlands when he was a baby.
People who find themselves in this situation are known as ‘accidental’ Americans because they acquire citizenship by birth but have never really lived in the country.
Ronald Ariës was told by his bank, Regiobank, that he needed to apply for a US social security number (SSN) or relinquish his American citizenship and provide a certificate of loss of nationality.
But Ariës refused because he said he should not be considered an American citizen.
The financial services complaints tribunal disagreed and ordered him to apply for a social security number.
Now Ariës is worried because, if he applies for an SSN and reports his foreign income to the IRS, he will be bound to pay taxes on the sale of a house in the Netherlands.
And, according to Kifid, if he doesn’t his case will be treated as tax evasion.
Rob Gerrtsen, spokesperson for action group Accidental Americans, told the Dutch radio: “The Treasury Department, which does determine the laws, has previously said that accidental Americans’ accounts without social security number or certificate of loss should not be frozen.”
He added that if Ariës does not want to apply for an SSN, this should not be proof of him being a tax evader.
A number is not mandatory
Founder of specialist tax advisory firm Americans Overseas, Daan Durlacher, added: “It really remains to be seen whether the position of the banks is correct.
“The people we help are well-meaning citizens. They are turned away by the banks, treated as tax evaders, and we think that is very harsh.”
Gerrten’s and Durlacher’s comments were translated by International Adviser from Dutch to English.