A growing number of Americans living abroad are being tempted to give up their US passports. Why? Because the Foreign Account Tax Compliance Act is bringing tougher asset-disclosure rules around the globe.
A new survey has many American thinking or on the verge of giving up their passports so their assets are not discovered in the new law.
The survey was headed by the financial consultancy group deVere who asked American expats around the world “would you consider voluntarily relinquishing your U.S. citizenship due to the impact of FATCA?”
Just over 73% responded ‘yes’ they would or have been actively considering it. Only 16% said they would never consider giving up their citizenship in the U.S. and 11% did not give a yes or a no.
The survey included American expats living in South Africa, UAE, United Kingdom, India, Japan, Philippines, Thailand, Indonesia, China and Hong Kong.
The harsh disclosure rule took effect on July 1 and requires foreign banks, investment funds and insurers to hand over information about American expats to the United States IRS. The first round of rulings are for accounts with more than $50,000 held by American citizens.
The law is intended to detect tax evaders using assets and offshore accounts to cover-up their wealth.
So far a general rule by most expats that have taken the survey noted that only three things remain for possessing a passport, one is the convenience for travel throughout the world – two, we can vote in US elections – and three, we pay taxes on both US and foreign income. When weighing in the factor of the new policy, many have to wonder its true intent and in the end, is their passport really worth holding onto?
In an alarming motion it appears that almost three-quarters of Americans living abroad are giving thought to renouncing their citizenship.
Just in the past 3 months 776 U.S. citizens gave up their passport and renounced their citizenship – those numbers are up 39% over the same three months just last year.
In an more somber form of ‘you can’t get out’ mentality, the US Department of State last month hiked fees on processing renunciation of citizenship from $450 to $2,350. The DOS said that the fees are required as consular officers are spending substantial amounts of time to accept – process and adjudicate cases.
Many foreign banks and financial management companies have begun to turn away US expats to deter the effects of the new law on their companies or businesses. The US Government has taken the bite out of other companies so hard they not only look at the American citizen’s information, they are also looking into the company that is holding the account.