Belgium Ends Sharing Information With the IRS on U.S. Persons Resident in Belgium

On May 24, 2023, Belgium’s Data Protection Authority made a decision that complying with the U.S. Foreign Account Tax Compliance Act (“FATCA”) to be a violation of the European Union’s General Data Protection Regulation (“GDPR”). The FATCA rules require foreign countries to share U.S. persons’ information with the Internal Revenue Service (“IRS”). Belgium will no longer share the tax data required under FATCA with the Internal Revenue Service (“IRS”). The Belgian finance ministry is currently appealing the Data Protection Authority’s decision.  

Under FATCA, Belgium and the United States established a bilateral agreement in place to exchange tax information between the two countries. This agreement was aimed at preventing tax evasion and ensuring compliance with tax laws. The decision by Belgian authorities to cease sharing tax data with the IRS stems from concerns over compliance with EU privacy and data protection laws. Similar to other EU members, Belgium has been grappling with issues regarding the privacy of its citizens’ financial information. This move is seen as an effort to safeguard the privacy of Belgian residents to bring the country’s policies in-line with evolving global privacy standards.

Even with the termination of data sharing between the United States and Belgium, U.S. persons residing in Belgium will still need to be aware of their U.S. reporting obligations to file FBARs (FinCEN Form 114) and Form 8938 to disclose certain foreign financial assets and foreign bank accounts, where the aggregate value exceeds specific thresholds. Non-compliance penalties for these filings are significant at $10,000 per undisclosed account on an FBAR and $10,000 per delinquent/incomplete Form 8938.

Now that the Belgian authorities have taken this step in protecting the data of its residents, we will have to wait and see how other countries respond to this development.

Author: Calvin Yung | [email protected]