Tax Hikes Encouraging Americans Abroad to Renounce Citizenship

 Posted on August 21, 2013 in Taxation Law

There has been a significant increase in the number of American citizens living abroad who have decided to give up their passports. That significant increase is being linked to a change in tax laws that is forcing many persons living abroad to wonder whether it is really worth holding onto their US citizenship any longer.

The United States currently is the only country to continue taxing citizens no matter where they live around the world. Now, a new tax hike looms and the hike will employ stricter assets disclosure laws under the Foreign Accounts Tax Compliance Act. Many Americans currently living abroad will feel the impact of these laws.

According to estimates, in the three months through June of this year, as many as 1,131 American citizens living abroad renounced their citizenships, and turned over their passports at embassies around the world. During the same period of time in 2012, there had been just 189 people who renounced citizenship. During the first six months of 2013, as many as 1,810 American expatriates decided to hand over their passports. That was a six-fold increase, and those numbers definitely merit attention.

As the implementation of the Foreign Accounts Tax Compliance Act looms, many American citizens who live abroad are wondering whether it is worth holding onto their citizenship. Under the law, banks will be required to withhold 30% from certain US-connected payments to accounts belonging to American persons, who have not provided enough information to the Internal Revenue Service.

There have been other obstacles to the implementation of the law. Several foreign institutions including Canadian as well as German banks, have reported that they find the new law very complex.