Number of U.S. expats renouncing citizenship due to FATCA will drop
The U.S. Treasury Department revealed this week that a record number of individuals relinquished their U.S. citizenship in 2014.
Since the Internal Revenue Service (IRS) was granted unfettered and unprecedented access to U.S. citizens’ foreign bank accounts in 2010, the number of people forsaking their citizenship has been at its highest. The amount of renunciations also reached a record high in 2013, totalling 3,000, with last year’s figure representing a 14 per cent increase (3,415) on this.
These figures, it can be assumed, are a direct reaction to the highly controversial, privacy-evading Foreign Account Tax Compliance Act (FATCA), which was rolled out on 1st July last year. deVere Group carried out a survey following the introduction of FATCA, which revealed an overwhelming 79 per cent of our American expat clients claimed they would consider voluntarily relinquishing their U.S. nationality as a direct result of FATCA.
However, I don’t believe that this trend will continue at this same rate.
The speed at which U.S. individuals have been renouncing their citizenship will reduce over time, as the record number of people cutting ties with their home country will diminish.
The main reason for this is due to the fact that an increasing number of individuals are becoming more FATCA-savvy, recognising the many ways the negative effects of this law can be mitigated, thereby sidestepping the highly emotional move of feeling compelled to surrender their citizenship.
Additionally, the financial services industry is responding in a more proactive way to the FATCA era and offering more and more FATCA solutions.
In comes as no surprise that the idea of giving up citizenship in order to conform to such a contentious law is most distressing. Hence why it should be solely viewed as a ‘last resort’ possibility. I’m confident this will increasingly be the case as people’s awareness of the bonafide FATCA solutions grows.
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