A growing number of wealthy U.S. citizens who live permanently abroad are finding it easier and cheaper to renounce their American citizenship, according to an article in Bloomberg. During the second quarter of this year, 1,131 citizens gave up their nationality -- a six-fold increase from second quarter 2012, when 189 citizens took such action.
A variety of challenges confront U.S. citizens who live abroad, including setting up a local bank account, obtaining a mortgage or procuring life insurance. Added costs associated with these tasks, Bloomberg reports, is partly responsible for the surge in Americans giving up their citizenship.
Another big factor for expats is the Foreign Account Tax Compliance Act, or FATCA, which introduces tougher rules for financial institutions and U.S. taxpayers regarding asset disclosure. The U.S. is one of the few countries to tax U.S. citizens even if they live abroad, although if you are working abroad, you can exclude some of your earned income.
While FATCA became law in 2010, the Treasury Department delayed the start until July 1, 2014, to give foreign financial institutions time to prepare. The FATCA requirements are causing some banks to shun U.S. clients or charge extra fees because of the extra burden of reporting.
Matthew Ledvina, a U.S. tax lawyer at Anaford AG in Zurich, Switzerland, told Bloomberg that, "With the looming deadline for FATCA, more and more U.S. citizens are becoming aware that they have U.S. tax reporting obligations. Once aware, they decide to renounce their U.S. citizenship."
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