A “remarkably high” two-thirds of Americans who live outside the US are considering renounce their US citizenship due to regulatory complexities stemming from the Foreign Account Tax Compliance Act, a global survey has found.

A “remarkably high” two-thirds of Americans who live outside the US are considering renouncing their US citizenship due to regulatory complexities stemming from the Foreign Account Tax Compliance Act, a new global survey has found.

deVere Group asked 400 of its American expatriate clients if they’re thinking about relinquishing their US citizenship due to the impact of FATCA, in response to which 68 per cent said they’ve “actively considered it,” “are thinking about it” or “have explored the options of it.” Just under a fifth (17 per cent) said they wouldn’t consider it, while 15 per cent weren't sure. This is not the first time deVere has polled its clients on this subject and identified the same trend (view here).  

FATCA was implemented in 2010 by the US government to crack down on expat citizens who might be evading taxes by using foreign accounts. It requires that individuals report their financial accounts held outside of the US, while foreign financial institutions report to the Internal Revenue Service about their American clients. This involves “substantial compliance obligations” for all non-US FFIs worldwide. Some critics insist that FATCA will do little, if anything, to truly curb tax evasion.

“More and more of our internationally-based American clients are now telling us, usually with a heavy heart, that they would be tempted to give-up their US citizenship to avoid what they feel is the unfair, complex and oppressive burden of FATCA,” said Nigel Green, founder and chief executive at deVere Group.

“FATCA is a huge imposition on ordinary Americans who happen to live and/or work outside the US and will involve significantly more expensive and laborious reporting requirements.  In addition, due to the onerous and costly impact of FATCA, many non-US financial institutions will no longer work with Americans - even if they have been clients for decades - which can make life outside the US ‘challenging’ to say the least,” Green added.

According to official statistics, the number of American expatriates relinquishing their US citizenship surged in the second quarter of 2013 to 1,131, compared with 189 in the same period a year ago. Green believes that the citizenship-renouncing trend is “likely to have skyrocketed” since it was revealed that Facebook co-founder Eduardo Saverin instead became a resident of Singapore, while Tina Turner is now a Swiss citizen.

But he urges those thinking of going down this route to “explore all the available planning options” to possibly negate some of the unfavorable aspects of FATCA. “This is especially important as there are certain established federal regulations aimed at discouraging Americans from renouncing their citizenship for tax reasons. These complex rules can include hefty ‘exit taxes’ and/or ‘gift taxes’, although there are many exceptions that can be applied,” he said.

While some foreign firms are turning away US clients as they are deemed a compliance burden, others have bitten the bullet. In the UK, for example, Brown Advisory rolled out an investment management and tax reporting service aimed at US expats living in the UK in August to plug the so-called “financial advice black hole” that appears to be manifesting.

As reported in October, the implementation date for FATCA has been pushed back six months to July 1, 2014. Read more on FATCA here and here.