FATCA: Everything US Citizens in the Netherlands Need to Know
The Foreign Account Tax Compliance Act (FATCA) is a key piece of legislation for U.S. citizens living abroad. If you’re an American in the Netherlands, it’s important to understand what FATCA entails and how it might affect your finances. Read here what FATCA is, how it works, and what you need to know to stay compliant.
What is FATCA?
FATCA stands for the Foreign Account Tax Compliance Act. It is a U.S. law created in 2010 to fight tax evasion. The law requires foreign banks to report accounts held by U.S. citizens to the Internal Revenue Service (IRS).
Under FATCA, U.S. citizens must report all their worldwide income and specified foreign assets to the IRS. The goal is to ensure that foreign-held assets are appropriately acknowledged by the U.S. government.
Are FATCA and CRS the same?
FATCA and CRS are not the same, although both systems focus on financial reporting and aim to address tax evasion. The CRS applies to multiple countries and citizens worldwide, whereas FATCA is specific to the United States and its taxpayers.
CRS, or the Common Reporting Standard, is a global initiative developed by the Organisation for Economic Co-operation and Development (OECD). Over 100 countries participate in CRS to share financial information about account holders across borders. This transparency helps prevent people from hiding assets in other countries.
FATCA, on the other hand, is a U.S.-specific law that targets tax evasion by U.S. taxpayers. It requires foreign financial institutions to report information about accounts held by U.S. citizens to the IRS.
Is FATCA only for US citizens?
FATCA applies to:
- U.S. citizens, including those living abroad.
- Individuals with dual citizenship, including U.S. nationality.
- Green card holders (permanent residents) living abroad.
- U.S. based businesses and trusts.
Even if you’ve lived in the Netherlands for years and only hold a U.S. passport, you are still required to comply with FATCA regulations.
How Does FATCA Work in the Netherlands?
Currently, there are 113 countries worldwide that have a FATCA agreement with the United States, including The Netherlands. This means that Dutch banks, such as ING and ABN Amro, as well as other financial institutions must comply with FATCA. They are required to report information about U.S. account holders to the Dutch tax authorities. These authorities then share this information with the IRS.
As a U.S. citizen in the Netherlands, you may face these obligations:
- Filling out Form W-9: Banks often request this form to confirm your U.S. tax status.
- Bank reporting: Your bank may share details of your account, such as balances and transactions, with the IRS.
In addition to bank reporting, you are personally responsible for filing financial information with the IRS using various. forms.
Forms and the FATCA
You need to be aware of these key FATCA-related forms:
- Form 114 FBAR (Foreign Bank Account Report): You must report your foreign bank accounts to the United States Treasury if the total value of all accounts exceeds $10,000 at any point during the year.
- Form 8938 (Statement of Specified Foreign Financial Assets): This form is used to report specified foreign financial assets to the IRS if they exceed certain thresholds
- For taxpayers living abroad: asset value on December 31
- Single $200,000
- Married Filing Joint $400,000
- For taxpayers living abroad: any point during the year
- Single $300,000
- Married Filing Joint $600,000
- Taxpayers living in the United States thresholds are $50,000/75,000 and $100,000/150,000 respectively
- For taxpayers living abroad: asset value on December 31
Both forms are important for staying compliant and avoiding penalties.
Specified Foreign Financial Assets
Specified foreign financial assets include foreign financial accounts and foreign non-account assets held for investment (as opposed to held for use in a trade or business). This includes but is not limited to foreign stock and securities, foreign financial instruments, contracts with non-U.S. persons, and interest in foreign entities.
There are some exceptions to these foreign held assets such as foreign social security.
Your FATCA Status
Determining your FATCA status typically requires a combination of self-assessment and, if applicable, registration through the IRS website. You can check the status of your FATCA registration by logging into the IRS website.
A Dutch BV (besloten vennootschap) Company may also be subject to FATCA regulations if it engages in certain financial activities or has U.S. owners.
If you’re not sure about your status it’s best to consult a specialized tax professional such as BNC Tax & Accounting B.V.
Staying compliant with FATCA
As a U.S. citizen, you are required to file a tax return with the IRS every year, even if you have no U.S.-sourced income. FATCA adds an extra layer of reporting requirements, which may mean additional paperwork.
Penalties for failure to file or late filing of foreign assets can be severe. This gets complicated so please consult with a tax professional. BNC Tax & Accounting can help you with your tax filings and ensure compliance with FATCA regulations.
Navigate Your Personal Tax Situation with BNC Tax & Accounting B.V.
Scott Grandfield, EA, NTPI Fellow
About the Author:
Scott has been in the tax business since 1989, he now focuses on supporting Americans living abroad with U.S. tax and trust returns. Scott is dedicated to simplifying your tax responsibilities and optimizing your financial outcomes.
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