Belgium will stop sharing the data of “accidental Americans” with US tax authorities after the country’s Data Protection Authority declared the information transfers unlawful, the government announced Wednesday.
Under the US Foreign Account Tax Compliance Act, or FATCA—an anti-tax evasion measure—foreign banks must send information about accounts held by Americans to their governments, which then share it with the IRS.
Congress passed the law to catch American tax evaders stashing their funds overseas, but it also snared “accidental Americans"—people who hold US citizenship by virtue of their birth but are established overseas. The accidental Americans argue that they are unfairly swept up in a disclosure dragnet for a country with which they have little connection. For some, consequences have included denial of banking services and other bureaucratic hassles in their home countries.
The Belgian Data Protection Authority said it found that the information-sharing requirements violate the EU’s General Data Protection Regulation, or GDPR. The agency took up the question after a group of accidental Americans and a dual Belgian-American citizen filed a complaint in 2020, the government said in a statement.
Article 96 of the GDPR allows international agreements that predate the EU measure to stand, if they complied with the law when they were concluded.
But both the data authority and the Belgian Litigation Chamber said the US-Belgian FATCA agreement’s “generalized and undifferentiated transfer of tax data” failed to meet standards calling for international agreements to contain exact objectives for transferring such data and to only process the data “strictly” necessary for the purposes sought.
“Article 96 cannot be intended to allow that international agreements remain contrary to the GDPR over time,” Hielke Hijmans, chairman of the Litigation Chamber, said in Wednesday’s statement. The exemption for pre-existing international agreements “does not exempt EU member states from (re)negotiating an agreement to make it GDPR compliant.”
The Litigation Chamber also found that FATCA “does not contain appropriate safeguards to ensure that exported personal data is afforded a similar level of protection as data within the EU.”
“Ordering the cessation of data flows to the United States under the FATCA agreement may seem harsh, but once we find that they do not comply with the applicable law, we are obliged to stop these data flows,” Hijmans said.
The decision is subject to appeal, the authority noted.
“The basic problem is that EU Member states breach their own laws in order to comply with US law,” Fabien Lehagre, president of the Association of Accidental Americans, said in a statement.
“This is the first time that the FATCA agreement has been officially declared illegal,” Lehagre added by email. “This is likely to snowball, as we have ongoing lawsuits in other countries.”
The group, which helped to bring the Belgian challenge, has other legal cases pending in Europe. It currently is awaiting a decision from the European Commission on a similar case related to France’s sharing of FATCA data, Lehagre said.
The US Treasury declined to comment. The Internal Revenue Service didn’t immediately respond to a request for comment.
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