Americans Quitting US As FATCA Approaches
According to Treasury Department statistics published in the Federal Register, 1001 United States taxpayers gave up their passports or their green cards in the first quarter of 2014, an increase of 47.4 percent over the 679 individuals that did so in the first quarter of last year. This figure was only surpassed by the 1,130 passports given up in the third quarter of 2013.
The number of people renouncing US citizenship is expected to grow to a new record level this year, above the 2,999 level in 2013.
The Treasury is required by statute to publish a quarterly list including the name of each individual who has lost or renounced US citizenship during the period. Green card holders are included.
The further increase in renunciations has come as actions from the Treasury and the Internal Revenue Service (IRS) gather pace to trace American undeclared assets and income held abroad. The deadlines under the Foreign Account Tax Compliance Act, which is intended to ensure that the IRS obtains information on accounts held abroad at foreign financial institutions by US taxpayers, are closing in.
In addition, awareness is growing among Americans living abroad about the onerous US tax reporting obligations attached to their US citizenship. For example, individuals are still required to file the Report of Foreign Bank and Financial Accounts if they have a financial interest in or signature authority over financial accounts, including bank, securities, or other types of accounts, in a foreign country, and if the aggregate value of the financial accounts exceeds USD10,000 at any time during the calendar year.
In his International Tax Blog, Andrew Mitchel, a tax lawyer from Centerbrook, Connecticut, put the rise in expatriations down to the US ‘worldwide’ tax code, which subjects all of an individual’s earnings to US taxation.
When reviewing the 2013 year-end figures, he pointed out that “the US is almost the only country in the world that requires its citizens that live permanently in another country to continue to file tax returns and pay taxes in the country of citizenship. Many believe that income earned from foreign sources is not subject to US tax, and that while residing overseas there is no need to file US tax returns – this is not an unreasonable belief, considering that most countries in the world operate in that way.”