The US tax authorities want automated data collection from EU banks about all "US persons"? Sure, that's FATCA. Reciprocity? Nope, US banks don't send anything back.
I believe most EU countries aren't that interested in that information.
It's mainly because of the unique policy of the US that you have to pay taxes as a citizen no matter where you live and work. Afaik all EU countries have the policy that if you live and work in the US you only pay US taxes.
Note that it has been a nightmare for US people living in EU, especially those who emigrated decades ago or were born to an american parent but never lived in the US. US considers them citizens, but they don't have any documentation, leading to true catch-22 scenario's like not having a SSN and needing a birth certificate to get one, but not being able to request a birth certificate without a SSN. There's also stories about people not being able to rescind citizenship because they aren't in any system except for the IRS's.
While they're less interested in that information than the US is, for the reason you explain, they're definitely still interested - many wealthy people who only pay tax in the country where they live still have substantial assets and income streams of various sorts overseas, which they must report in their local tax return.
> I believe most EU countries aren't that interested in that information.
France at least appears to be interested, requiring you to explicitly list every foreign place you can stash money on tax returns every year. If you have any kind of French rental income, no matter where you are in the world, I understand you have to declare. There is an EU directive for reciprocal information sharing and I understand it is used.
There are fines and penalties for not declaring a foreign account. The fine is not income or wealth linked, so it seems like it wouldn’t really bother anyone with the sort of wealth to benefit from not declaring; the penalty is having the stashed money treated as income for the year it is discovered, which seems like it could make certain people nervous.
> Note that it has been a nightmare for US people living in EU
It appears to make life much harder in all manner of ways. When I opened my French bank account, the forms placed a heavy emphasis on me not being a US citizen. I asked and was told that it would be much more difficult to open an account.
Does France require this information for French citizens who no longer live in France, but moved to (for example) the United States 20 years ago?
Or, as in the case of a former partner of mine: She was born in the US, from Belgian parents who worked there for a few monhts, then moved to Belgium before her first birthday. When FACTA came into play she was in her thirties, and suddenly all banks were required to submit information about her to the US. Some (Belgian) banks told her they would cancel all services as long as she remained a US citizen.
> Does France require this information for French citizens who no longer live in France, but moved to (for example) the United States 20 years ago?
No, my understanding is only if you actually have income from France – such as rental income. Income is income, and it seems fair.
I believe the US is truly exceptional with FACTA, but it’s probably only because of their current position that they are able to claim global jurisdiction over domestic legislation. If Iran passed such legislation, I doubt any banks would be allowed to comply. FACTA is often cited as a reason for people renouncing US citizenship.
The intergovernmental agreements signed with the US to enable FATCA reporting often also include a reciprocity clause requiring the IRS to provide information to foreign tax authorities - sections 3 and 4 of https://www.irs.gov/pub/irs-drop/rp-14-64.pdf are a (possibly outdated) list of countries that the IRS has manual or automatic information sharing agreements with.
Definitely - to a point. You pay local taxes first, but if they aren't high enough, you still have to pay US taxes. If you are married to someone of a different nationality, you cannot use online tax filing services without the spouse getting a number from the US government and reporting their income as well - even if they have never lived or worked in the US.
So it turns out that living in Norway means that I have to file paper taxes any year I work, but generally don't have to pay since Norway's taxes are high enough. If I lived somewhere with a low tax rate, I'd have to file and pay taxes.
Note: In general, I don't have to pay All taxes. We have Federal, state, and local taxes - they are generally only concerned with paying federal taxes while I live overseas. This also means that someone might still pay a lower tax rate overseas, depending on the state that they came from and the type of income they receive.
It‘s complicated for both sides. US citizens have to file their taxes but will be mostly exempt (depending on their income) since they will be already taxed abroad.
Likewise EU citizens may be taxed at home, depending on where the income originates.
So it‘s complicated.
But it‘s true that most countries determine where you are a resident (or have income from there) and then will tax you primarily on that and citizenship has no influence.
It is not true that we are "mostly exempt": only earned income (a narrow definition) is exempt.
And while it is true that many other countries have versions of taxing citizens living abroad for some time or under certain conditions (like having assets at home or conditions that deem the stay abroad "temporary"), there are only two countries in the world that have no mechanisms for stopping this taxation once one has truly and surely severed financial ties: the US, and Eritrea.
That's correct, American citizens are required to pay tax to the IRS regardless of their residency. However, you can deduct something like $106,000 from your yearly income if it's already been taxed, to avoid double-taxation of income.
Yes, around 106k USD, but this exemption applies only to EARNED income. The definition of earned income is quite narrow. This can cause a massive headache.
The way the US deals with taxation abroad is a travesty. I for one will be renouncing my citizenship because of it. Few countries deal with emigration in a perfectly hassle-free way, but the US makes living a life in any other country impossible if at any point you rely on income that isn't bog standard salary.
It's mainly because of the unique policy of the US that you have to pay taxes as a citizen no matter where you live and work. Afaik all EU countries have the policy that if you live and work in the US you only pay US taxes.
Note that it has been a nightmare for US people living in EU, especially those who emigrated decades ago or were born to an american parent but never lived in the US. US considers them citizens, but they don't have any documentation, leading to true catch-22 scenario's like not having a SSN and needing a birth certificate to get one, but not being able to request a birth certificate without a SSN. There's also stories about people not being able to rescind citizenship because they aren't in any system except for the IRS's.