While the Belgian Data Protection Authority (DPA) previously ordered Belgium to stop sharing the data of so-called "accidental Americans" with the US tax authorities, the Brussels Court of Appeal has now annulled that decision.
Under the US Foreign Account Tax Compliance Act (FATCA) – an anti-tax evasion measure – financial institutions all over the world must transmit the financial account data of all their clients identified as US citizens to the country's authorities.
This includes the data of "accidental Americans" – those who acquired American nationality because they were born in the United States but have no other ties to the country. Because the US tax system is based on citizenship rather than residency, they must still pay American taxes even though they might never have set foot in America.
Belgium was among the countries that previously signed an intergovernmental agreement with the United States to implement FATCA, meaning the Belgian tax authorities effectively act as an intermediary for relaying the information from banks to the US tax authority – essentially breaching their own laws to comply with the American ones.
But in May 2023, the Belgian DPA declared the information transfers "unlawful" and ordered the country's tax authorities to stop them. The decision was warmly welcomed by accidental Americans in Belgium, however that ruling has now been annulled by the Brussels Court of Appeal.
"This judgement, without ruling on the merits, seems to be passing the hot potato back to the DPA, perhaps in a spirit of buying time," Fabian Lehagre, President of the Association of Accidental Americans (AAA), said in a statement.
Fully in line with EU law
In practice, FATCA entails large and automatic information transfers which violate European and national laws on personal data protection and privacy, including the EU General Data Protection Regulation (GDPR). Several reports by the European Parliament's PETI committee have already evidenced this.
Back in May, the DPA's main reason for prohibiting the data sharing was its "disproportionate character," as the FATCA required information transfers of nearly all Belgian-Americans – most of whom "do not pose any risk" in terms of tax avoidance or tax evasion.
"The DPA's conclusions on the merits remain highly relevant and I believe it is high time that the EU Member States start renegotiating the FATCA agreements in order to exclude 'accidental Americans' from their scope and to include sufficient guarantees in terms of data protection," Lehagre said now.
He added that the Belgian DPA's decision was "fully in line" with the judgment of the Court of Justice of the EU of 24 February 2022, which prohibited "any generalised and indiscriminate collection of data" for tax purposes. They also established that the Belgian tax administration did not provide sufficient information about how the FATCA-induced data was processed, though this is required by the GDPR.
However, the Belgian tax administration took the ruling to the Brussels Court of Appeal, which has now annulled the DPA's decision – without addressing the merits of the case. The Court has now sent the case back to the Belgian DPA, arguing that the data protection authority, requesting that it better explain its reasoning against FATCA-induced data transfers.
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For Lehagre, the judgment of the Court of Appeal is "overly strict," as the decision of the Belgian DPA was "extremely well-motivated" and clear as to why it departed from the inspectorate’s report. "Justice delayed is justice denied, but we cannot imagine that the Belgian DPA will take a different decision and depart from its well-reasoned decision of May 2023."
Outside of Belgium, the AAA is awaiting a decision from the European Commission on whether it will take France to the EU's Court of Justice for not halting the FATCA-induced data transfer. A similar case is pending in France's Conseil d’Etat (supreme court) and the AAA has also launched a case in Luxembourg to call a stop to such transfers. A judgment from the latter is expected in the first half of 2024.
