Dutch Americans are at risk of paying taxes both in the Netherlands and the US; double taxation. During an interview with Dutch radio NPO 1 Daan Durlacher of Americans Overseas, explained how this can happen.
I was born in Apeldoorn in the Netherlands but because I have an American mother, I am considered an American citizen. I pay my taxes in the Netherlands and in America as well. I have to file in America. In my case, as an entrepreneur, this has led to double taxation. And a hefty amount too.
You would think that this is impossible. There is a treaty between the Netherlands and America to avoid double taxation. In actuality this treaty does not correspond to reality. There are many unpleasant and painful gaps in the treaty.
The most common one is, for example, the sale of your house in the Netherlands. In the Netherlands they do not tax profits, but America does. So Dutch Americans must pay tax on the excess value of their home.
This also applies to shares you may own for your pension plan. In the Netherlands you pay a so-called property tax and in America you pay tax on the actual profits of those shares. Again: double taxation.
Punishable if you do not file your taxes
Many Dutch with a US citizenship do not know this. When I heard about this by accident, it scared the living daylights out of me and I tried to figure it out. I was lucky that Michael Littaur was the one that told me, he helped me enormously.
That actually gave us the idea to start americansovereas.org to inform people, because people just do not know. The official authorities, both Dutch and the US, do not actively publicize this information. People are scared. If they do not file their taxes, they are punishable in America. This is a situation you do not want.
The biggest problem: on the one hand you have a duty to file your tax, on the other a duty to report all the bank accounts you have in the Netherlands to America. If you do not this, you are committing a criminal offense and that can be easily fined in America. Unfortunately this already happens.
Some people might think: I know this information now but I am not going to file because then they will not find out, but this is not the case. The Dutch government signed a treaty with America called FATCA.
FATCA ensures that all Dutch financial institutions, banks but also insurance companies, have the duty to identify whether they have Americans among their customers, including people with dual nationality. If this is the case, then they are obliged to transfer all data (name, address, place of residence) but also the balance on the bank accounts, to America.
The bank must also ask those people a so-called Social Security Number (SSN). But many Americans living in the Netherlands do not have this number.
The application process of the Social Security Number (SSN) is problematic and complicated. You cannot file your tax in America without this number but the waiting time to obtain a Social Security Number has at this moment increased to between six to nine months. So in those months, you are a sitting duck.
There is yet another difficulty for the eight million Americans worldwide living outside America. The US government has an amnesty program (Streamlined Procedure), which ensures that if you can explain that you did not know you had to file your taxes in America, you can fulfill your obligation without the risk of fines.
However, if you have to wait nine months, you of course run the risk that the amnesty program lapses and then you are in the wrong. Another problem is that the Dutch banks will not wait nine months for your SSN number.
America can then place a tax penalty on your failure to file all your bank accounts; the penalty can be up to 50% of the highest of balance level of that year, so that is very tough.
That is why we from Americans Overseas made it our goal to inform people so that all these problems do not become overwhelming and that appropriate action can be taken on time
Avoid double taxation
Americans Overseas helps Americans living abroad to become US tax compliant in an organised way and avoid unnecessary double taxation. Based on your personal situation, we introduce you to the appropriate US tax advisor in our AOS network who will make you a tailor-made offer to help with your tax filings free of charge and free of any obligations.