FATCA forces US expats surrender their passports
FATCA is having a marked effect on the millions of American expats across the world who have found themelves in deep trouble due to a lack of available and sensible financial advice, and are responding by giving up their US passports.
Official US figures show that, compared to the same period in 2012, the number of Americans giving up their citizenship has increased six-fold as Washington continues to push ahead with its contentious FATCA (the Foreign Account Tax Compliance Act) programme.
Due to be implemented on the 1st of July 2014 and already unpopular (some critics have called it ‘the worst law most Americans have never heard of’), this new legislation will require all non-US financial institutions to disclose the financial details and activities of American clients to the Internal Revenue Service (IRS), or face substantial sanctions.
According to data gathered by the Federal Register, this year, 1,131 American citizens surrendered their passports at overseas embassies, a marked contrast to the situation last year when only 189 American nationals gave up their nationality
The main problem for Americans living overseas is that, as the FATCA deadline is looming closer, an increasing number of non-US banks and financial consultants are refusing to do business with their American clients because the stakes are potentially so high. The hard truth is that providing a FATCA compliant service is massively time consuming and costly. This means that more and more expat Americans are being abandoned at a time that they desperately need advice and assistance.
Giving up one’s citizenship might seem like a drastic step, but it seems that an ever increasing number of Americans living overseas feel that this toxic new legislation leaves them little choice but to take on the nationality of their adopted country.
The already alarming number of US citizens renouncing their American passports looks set to soar as the ‘the FATCA era’ moves closer. This will be the easiest way for expats to access reliable financial advice and show their displeasure at this unusually draconian concept, about which there is already a growing sense of anger and frustration.
Awareness of FATCA is intensifying and this is being layered on top of a general feeling of anger that the US is the only country in the OECD [Organization for Economic Cooperation and Development], which taxes citizens wherever or not they reside within the country. Even if an American earns all of his or her income in Europe, they are still liable for tax in the States.
Nigel Green deVere Group
Blog written 14th of August