More than three-quarters of American expats and green-card holders who have taken out a supplementary overseas pension contract say that they are satisfied that they will now not relinquish their US citizenship to mitigate the adverse effects of the controversial Foreign Account Tax Compliance Act (FATCA), according to a report by deVere Group.
In a recent survey of deVere Group’s overseas-based American clients, 78 per cent who have created a tax-qualifying, FATCA-compliant pension plan would "no longer consider giving up U.S. citizenship" to reduce the burden of the incoming tax law.
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deVere’s findings buck the official trend. According to Treasury Department figures published in the Federal Register, 1001 Americans gave up their passports or green cards in Q1 of 2014 – an increase of 47 per cent on the same period last year. This number was only surpassed in Q3 of 2013, when 1,130 passports were handed back.
It is expected that a record number of U.S. citizens will give up their passports this year – meaning more than 3,000 are forecast to do so before then end of 2014.
FATCA, part of the Obama administration’s 2010 HIRE act, has a host of serious unintended consequences for Americans living overseas. These include being rejected from non U.S. financial institutions, such as banks in their country of residence, and the onerous and expensive new reporting requirements for anyone with assets of more than $50,000.
Nigel Green, founder and chief executive of deVere Group, comments: "The Treasury Department’s figures seem to highlight a clear correlation between the increase in expatriations and growing awareness amongst Americans of FATCA’s highly contentious, burdensome and expensive requirements."
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By GlobalData"The official statistics make for depressing reading. It is our experience that Americans are, quote rightly, loathed to give up their U.S. passports – they don’t want to sever these ties, but do so as they feel there’s no viable alternative.
He continues: "Against this backdrop of soaring U.S. passport relinquishments, it is extremely encouraging that the overwhelming majority of those we polled who have taken out an additional overseas pension contract to mitigate FATCA’s complicated, costly and privacy-infringing demands, told us they were ‘satisfied with the action taken and that ‘they would no longer consider giving up U.S. citizenship’."
Amongst other benefits, a supplementary overseas pension contract recommended for U.S. taxpayers with assets abroad will allow the holder to permit a qualifying expat to make annual contributions to a pension fund over and above US$51,000 – which is not possible within the current U.S. tax-approved regime; to take advantage of tax-deferred investment growth; and to benefit from the opportunity to invest freely into Passive Foreign Investment Companies (PFICs) without incurring U.S. tax penalties and burdensome tax reporting procedures.
There are an estimated 7.2 million American expatriates and the 13 million green-card holders. 361 deVere clients were polled.
