23/09/20

US: American expats renouncing citizenship in record numbers.

As published on internationalinvestment.net, Tuesday 22 September, 2020.

A record number of Americans are renouncing their citizenship, with renunciations in the first half of this year soaring to 5,816, more than twice as many as gave up their passport in all of 2019.

Until a decade ago, fewer than 1,000 Americans per year, on average, chose to renounce their citizenship. Now, the country is on track to hit a record-breaking 10,000 people renounce US citizenship in 2020.

According to research by the Enrolled Agents and accountants Bambridge Accountants New York, the figures show a 1,210% increase on the prior six months to December 2019, where only 444 cases were recorded.

Americans must pay a $2,350 government fee to renounce their citizenship, and those based overseas must do so in person at the US Embassy. Most embassies and consulates stopped making renunciation appointments this spring, due to the pandemic.

"There has been a huge turnaround during coronavirus of US expats renouncing, where the figures have been in steep decline since 2017," Alistair Bambridge, partner at Bambridge Accountants New York, said in a statement.

"The huge increase in US expats renouncing from our experience is that the current pandemic has allowed individuals the time to review their ties to the U.S. and decide that the current political climate and annual US tax reporting is just too much to bear.

"For US citizens living abroad, they are still required to file US tax returns each year, potentially pay US tax and report all their foreign bank accounts, investments and pensions held outside the US For many Americans this intrusion is too complicated, and they make the serious step of renouncing their citizenship as they do not plan to return to live in the US.

"There has been a silver lining for US expats that they have been able to claim the stimulus check of $1,200, and $500 for each child. For those individuals and families, the proposed second stimulus check will be very welcome once the HEALS Act is approved," Bambridge added.

In 2010, Congress passed the Foreign Account Tax Compliance Act (FATCA), which requires foreign financial institutions to report assets held abroad by U.S. citizens and green card holders.

The FATCA international tax code was designed to stop Americans stashing money abroad to evade tax. It forces banks worldwide to start revealing, via national tax agencies, information on clients with links to America. And it spawned the Common Reporting Standard, whereby over 100 countries swap data with each other to discourage cross-border tax dodging.

But many Americans living abroad have found it has also caused problems for them as they are being locked out of retail finance in their host countries.. Banks in France have warned that they could be forced to close up to 40,000 accounts belonging to US citizens because of ongoing difficulties with FATCA.

The 'Accidental Americans'' association has been battling for years to be exempt from a US demand that all its citizens overseas file bank details along with yearly tax returns.

The legal challenge follows a move by a US-born British citizen who started a crowdfunding campaign to stop HMRC sharing her personal information with the US Internal Revenue Service (IRS) under FATCA.

There are an estimated 9 million US expats.