The findings, which were revealed in a survey by deVere, come alongside the news that the number of Americans renouncing US citizenship has increased by 39% in the three months to September.
The company asked 400 of its American clients whether they would consider voluntarily relinquishing their US citizenship due to the impact of FATCA, to which 73% said they had “actively considered it” or have “explored the options of it.”
In contrast, just 16% said they would not consider relinquishing their US citizenship, and 11% said they did not know.
DeVere’s chief executive, Nigel Green, said the statistics were “alarming”, but added that they should come as “little surprise” due to the “excessively onerous, burdensome and expensive” nature of FATCA’s reporting requirements.
“Amercians abroad who are being adversely affected by FATCA should explore all the available options to them to mitigate the absurd tax law’s effects with an independent financial advisor,” he said. “This is especially important as there are certain established federal regulations aimed at discouraging Americans from renouncing their citizenship for tax reasons.”
Andy Thompson, director, operations, at the Wealth Management Association said the news “did not surprise him”, adding that there has always been a compliance issue with US expatriates running further back than FATCA.
“I do think FATCA has lead any IFA firm to consider changing their relationship with a US citizen, I just think it means they will now have to report them differently,” he said. “It will simply lead to additional expenses for the company; it is one of the misnomers of FATCA.”
“For our members, FATCA is not the biggest issue, many of them have more many more clients with the crown dependencies, which have different reporting requirements to meet.”
Qualifying payments
FATCA is the IRS’s ambitious attempt to crack down on global tax avoidance by US citizens who work abroad or hold their money in offshore accounts without declaring it to the US authorities.
Passed in 2010 by Barack Obama, the act requires FFIs to identify and report the financial details of their American clients, whose tax duties still apply when they move either themselves or their money from the US.
The act’s “withholding” stage was introduced in July, and requires all foreign financial institutions (FFIs) to disclose all US related information about new and existing clients to the US Internal Revenue Service (IRS).
In the event that an FFI fails to comply, a 30% tax will be imposed by US authorities on withholdable payments.
Qualifying payments can include items such as interest or dividends from US sources, or sale proceeds from property that can produce US interest or dividends, such as those frequently made by expat US citizens and US businesses operating internationally
