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Almost 80% of Americans living abroad are considering relinquishing their U.S. citizenship to escape the consequences of the Foreign Account Tax Compliance Act, according to deVere Group. That represents an increase of 11 points since last year.
The Foreign Account Tax Compliance Act, or FATCA, requires U.S. taxpayers to report certain foreign financial accounts and offshore assets, and requires foreign banks to disclose information on accounts held by U.S. taxpayers. It was passed as part of the Hiring Incentives to Restore Employment (HIRE) Act in March 2010, and took effect July 1.
In a survey released Tuesday of over 400 American expat clients, deVere Group found 79% of respondents said they had “actively considered,” were “thinking about,” or had “explored the options of” renouncing U.S. citizenship.
However, the U.S. State Department noted on its website that anyone considering such a drastic — and irrevocable — step “should be aware of the fact that renunciation of U.S. citizenship may have no effect whatsoever on his or her U.S. tax” obligations.
Fourteen percent of respondents said they would not consider relinquishing their citizenship.
When asked the same question in November, just 68% of respondents agreed they were considering taking that step.
“The 11% jump in the number of Americans who are tempted to sever official ties with the United States highlights how the true scope of FATCA’s adverse effects is now really hitting U.S. citizens who live and/or work overseas,” Nigel Green, founder and chief executive of deVere, said in a statement.
Respondents cited not being able to open bank accounts in their new countries, having existing accounts shut down, and the cost and burden of compliance with FATCA as common problems, according to Green. Additionally, he said, “some told us that they felt they were now under suspicion by the IRS, even though there was no question of any wrongdoing or having any taxes owing.”
The Treasury Department is required to publish a quarterly list naming the people who have renounced their citizenship (see the latest such list of 'expatriated' people from April 2014). Almost 3,000 people did so in 2013, a 221% increase since 2012, according to Forbes.
Check out The Expat Life: Helping Clients Retire Overseas on ThinkAdvisor.