Fatca could push French banks to close up to 40,000 accounts

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Fatca could push French banks to close up to 40,000 accounts

Banks in France have warned that they could be forced to close up to 40,000 accounts belonging to US citizens because of ongoing difficulties with the Foreign Account Tax Compliance Act (Fatca).

France is a signatory to an agreement to give the US Internal Revenue Service (IRS) personal and financial data about accounts and investments controlled by US taxpayers.

The information is compared with tax filings so the IRS can check the right amount of tax is paid on income and investments. 

The Fatca international tax code was intended to clamp down on international tax avoidance, but many Americans living abroad have found it has also caused problems for them.

The controversy in France and other countries is the US tax system deems anyone with a connection to the country is a taxpayer even if they only lived there for a short time as a child. And as a US citizen, they are obliged to pay tax on their worldwide earnings

These taxpayers with a tenuous link are called ‘accidental Americans' and many do not realise they are subject to paying taxes in the US.

Although some countries started passing data in 2014, the IRS offered France a period of grace before reporting that ends in January 2020.

But after this waiver expires, the president of the French banking association, Laurent Mignon, warns that French banks may face no choice but to close the accounts of all 'accidental Americans' - thought to be about 40,000 people.

He wrote a letter to France's finance minister saying: "As from 1 January 2020, including for accounts opened before that date, if they are unable to provide such information, banks may be unable to fulfil their reporting obligations to the tax authorities."

"French banks may therefore be required to close the accounts of the customers concerned (before December 31st 2019)."

"To date, approximately 40,000 accounts have been impacted. Otherwise, banks would be likely to be subject to very significant financial and reputational sanctions."

Americans in France are also reporting it is getting harder to open French accounts as they are viewed as 'difficult' by French banks because of the requirements of Fatca.

 

This article was first published on InvestmentEurope's sister publication International Investment