Question 11203 — treaties and conventions

Summary

Mr. Fabien Matras alerts the Minister of the Economy and Finance to the difficulties encountered by French and dual nationals subject to American taxation, following the application of the FATCA law. The questions asked to the Government and the various debates that these cases have raised have focused on dual nationals and “accidental Americans”, people who are linked to the United States by a set of factual elements (“ indices of Americanness"), but this forgets that the application of this legislation also impacts French nationals sharing a common heritage with these people. Adopted by the United States of America as part of the development of the fight against tax fraud, the Foreign account tax compliance act (FATCA) of March 18, 2010 establishes the obligation for any financial institution located abroad to transmit to the Internal Revenue Service (IRS) provides tax information about American taxpayers. The challenge of FATCA is to organize the automatic transmission of this data, the terms of which are governed by the bilateral agreement of November 14, 2013, validated by Law No. 2014-98 of September 29, 2014. Thus, under article 1649 AC of the general tax code, French financial institutions are subject to a reporting obligation concerning their customers presenting "indications of Americanness" provided for in point 1 of paragraph B of section II of the annex The agreement of November 14, 2013 annexed to decree no. 2015-1 of January 2, 2015. In order to ensure compliance with this agreement, several sanctions have been provided for with regard to individuals and banks: the former being able to be prosecuted by the tax authorities and be subject to a tax of repatriation of 17.5% on profits of the last thirty years of the companies held, for the latter the sanctions go as far as a withdrawal of the banking license in the United States. Analysis of the parliamentary debates on the 2014 FATCA law reveals that it was announced that the implementation of these provisions risked leading certain banks to discriminate against their customers with an American index; yet no particular preventive measures have been taken leading de facto to a double sanction for the persons concerned. A direct financial sanction, first of all, which is characterized by double taxation. De jure, if the convention of August 31, 1994 linking France and the United States eliminates the risks of double taxation, the fact remains that the differences in tax regimes applicable in each country lead to double taxation. Thus, the CSG and the CRDS do not fall within the scope of this convention: considered as social charges by the IRS, they do not give right to a tax credit with the American tax authorities, which has the consequence of subjecting, de facto, the persons concerned to double taxation for investment income and capital gains on assets. Likewise, certain tax deductions provided for by French law (particularly number of dependents), are not provided for or recognized as such by the IRDS, forcing dual nationals to pay the difference to the American tax authorities. Furthermore, people wishing to avoid this double taxation can abandon their American nationality but the procedure is costly, requiring the intervention of lawyers in France and the United States, and is subject to prior tax compliance. Furthermore, in the absence of concrete links with the United States, where they have not resided, and official documents from this country, these people have difficulty providing the information requested by French financial institutions, in particular an American tax identification number which can take a particularly long time to obtain. An indirect sanction, then, due to discrimination by certain banks against customers presenting indications of Americanness, as noted in the opinion of the Defender of Rights of May 23, 2018: arbitrary closures of accounts, refusal to open, inability to subscribe to savings and investment products all without taking into account the exemptions provided for by the agreement, in particular for individuals whose balance does not exceed 50,000 US dollars, as provided for in point 4 of I of Annex I of the aforementioned agreement. These issues are dramatic insofar as, on the one hand, they lead to a transfer of French capital for people who were not born or have not resided in the United States (this is particularly the case in situations with people who have common assets with dual American nationals) sometimes causing the annihilation of their life savings, due to the sanctions applied by the American tax authorities; and on the other hand arises the question of the reciprocal application of this agreement by the American tax services. On the international level, he therefore asks what solutions are being considered by the Government to ease the procedures for abandoning US nationality and smooth out the disparities resulting from the application of two different tax regimes, as well as guarantee the reciprocity of the agreement. On the internal level, He also asks him what are the measures envisaged to extend the guarantees of the “right to an account” for people who are victims of discrimination on the part of their bank, this right currently only allowing them to benefit from limited services.

Machine translation from French. The official text remains authoritative.

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