U.S. expats explore options to reduce negative impact of FATCA

14 Mar

As a growing number of American expats become increasingly aware of the legitimate methods by which they can mitigate the financial fallout of FATCA, I fully expect that fewer and fewer will be taking the distressing and drastic decision to give-up their U.S. passports.

As Gulf News reported this week, deVere is now enabling U.S. expats who could be adversely affected by the highly controversial and soon-to-be-implemented Foreign Account Tax Compliance Act – that’s to say anyone with assets of more than $50,000 outside the U.S. – to reduce its serious impact by setting up a supplementary, tax-efficient overseas pension contract.

In the article, our senior technical adviser, Reece Fallaize, explains: “Amongst other benefits, the pension schemes we recommend in this instance will allow a qualifying U.S. expat to make annual contributions to a pension fund over and above US$51,000 – which is not possible within the current U.S. tax-approved regime; to take advantage of tax-deferred investment growth; and to benefit from the opportunity to invest freely into Passive Foreign Investment Companies (PFICs) without incurring U.S. tax penalties and burdensome tax reporting procedures.”

Ever since the major challenges that FATCA would present for Americans living overseas became clear, there has been a sharp increase in the number of U.S. passport relinquishments.  In essence, and completely understandably, more and more U.S. expats – the vast majority of whom owe no taxes and have done nothing wrong- wanted to sever official links with America so as not to meet the ridiculously complex, privacy-infringing, lengthy and expensive reporting demands of ‘Uncle Sam’s’ latest whim.

As reported in The Wall Street Journal, amongst other publications, a deVere Group survey found that two-thirds of U.S. expats said they’re tempted to give up their passports in response to FATCA.  Our findings are supported by official U.S. figures that show a dramatic upsurge in relinquishments between 2012 and 2013.

However, with the new FATCA-compliant solutions for American expats now in the market, I am hopeful that fewer will be driven to give-up their citizenship – as nationality is something most expats find is an integral part of their identity, and giving it up for a contentious and fundamentally flawed new tax law is something they are justifiably uncomfortable in doing.

Nigel Green deVere Group

Blog written 14th March



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