SUPPLEMENTARY OVERSEAS PENSIONS MAY OFFER FATCA SOLUTION
More than three-quarters of US expatriates with supplementary overseas pensions contracts say they won’t renounce their citizenship to escape the Foreign Account Tax Compliance Act (Fatca).
The result, from a survey by financial adviser deVere Group of 361 of its own clients, suggests the supplementary overseas pension contract may stem the tide of citizens who are giving up their passports.
According to the US Treasury Department, more than 1,000 Americans renounced their citizenship in the first quarter of the year, a rise of nearly half compared with the same period in 2013.
Nigel Green, chief executive of deVere Group, says there is “a clear correlation between the increase in expatriations and growing awareness amongst Americans of Fatca’s highly contentious, burdensome and expensive requirements”.
Intended to recoup tax owed to the US authorities by citizens with accounts abroad, Fatca has been criticised by some asset managers for adding a significant reporting and compliance burden to all firms with US clients.
For individual US citizens, Fatca imposes reporting requirements for anyone with assets of more than $50,000 (€36,500). However, supplementary overseas pension contracts allow qualifying expatriates to make annual contributions to a pension fund of $51,000 or more and to invest freely into passive foreign investment companies without incurring US tax penalties.