US expats give up passports due to ‘black hole’ created by FATCA
13 Aug, 2013
Millions of American expats across the world are finding themselves in a “financial advice black hole” and this is prompting a growing number of them to give up their US passports, says the world’s largest independent financial advisory organisation.
The comments from the deVere Group, which has consistently vowed to maintain its focus on Americans living abroad, follow official US figures revealing that the number of Americans renouncing their US citizenship has increased six-fold in the second quarter of 2013, compared to a year earlier, as Washington prepares to implement stricter asset-reporting regulations, under FATCA (the Foreign Account Tax Compliance Act).
FATCA, dubbed by its critics as ‘the worst law most Americans have never heard of’ and reportedly to come into effect on 1 July 2014, will require all non-US financial institutions in the world to disclose the financial activities of American clients directly to the Internal Revenue Service (IRS), or face hefty sanctions.
1,131 people gave up their US passports at American embassies in the year to June. Only 189 US nationalities were renounced by expats the year before, according to Federal Register data.
Nigel Green, the deVere Group founder and chief executive, says: “As the FATCA deadline draws closer a growing number of non-US banks and wealth managers have been shutting the door on Americans outside the US because servicing them in a ‘FATCA-compliant’ manner is deemed too onerous and too costly. As a result, more and more US expats are finding themselves abandoned in a financial advice black hole.”
He continues: “To overcome this alarming situation that they are now facing, an increasing number of American expats are telling us that they are renouncing, or considering renouncing, their homeland citizenship, and adopting the nationality of their adopted country instead.
“As ‘the FATCA era’ moves closer, I would expect the number of Americans giving up their US citizenship to soar – not only so as they can access financial advice and carry out day-to-day banking procedures in their country of residence, but also because there is a developing sense of frustration around the FATCA concept itself.
“As awareness of it intensifies, there’s growing anger that the US is the only country in the OECD [Organization for Economic Cooperation and Development] which taxes citizens wherever they reside. For instance, should an American earn all his or her income in the UK, they are still liable for tax in the States.”
Mr Green concludes: “Relinquishing one’s citizenship is a drastic and emotive decision. As such, we would urge American expats who are considering taking this step, to first seek advice from one of the remaining advisory firms, such as the deVere Group, which is committed to helping American clients achieve their financial goals, wherever they choose to live in the world.”
There are an estimated seven million American citizens residing outside the US.