The number of Americans giving up their citizenship has rocketed this year – partly, it’s thought, because of a new tax law that has frustrated many ex-pats.
Goodbye, US passport.
That’s not a concept that Americans contemplate lightly. But it’s one that many of them seem to be considering – and acting on.
Victoria Ferauge, 47, is married to a Frenchman and has lived abroad for nearly 20 years, primarily in France. If her adopted country finally agrees to Fatca then she wonders what the implications will be…..
I don’t know any Americans abroad who aren’t thinking about giving it up but what I say to myself is that I will fight as long and as hard as I can.
A good article by BBC and one well worth commenting on by Brockers. I don’t know where they got the USD 100 billion unpaid tax reference. Also, the article fails to note that the UK rolled over like a puppy and threw its own UK dual US citizens under the bus and was the first country to do so.
@Steve Klaus
They did like so many reporters do, just quote the CW $100 Billion that came as a back of an envelope wag from an attorney Staffer. No rigorous criteria used. It then becomes repeated and repeated until it is taken as gospel…
Here was the original source…
http://www.freedomandprosperity.org/files/blum-crs-ltr.pdf
@Steve Klaus, it doesn’t look like the article is accepting comments, but it does have a section seeking input on renunciations, so they must be planning another story.
Guess we all need to submit our stories then.
Please do send your stories, folks. Even if you’re really REALLY tired of telling it and you’ve already posted it here at Brock or elsewhere. 🙂 This is a really fine opportunity to be heard.
The reporter who did this story is a real pro. We talked, he asked a lot of questions and then he sent what he was going to use to me before the article ran so I could confirm that this is what I meant to say. I appreciated that so much and the contact.
Absurdity of Tax Reports for American Citizen Abroad
————————————————————————————————————————————–
I’d like to present you the following astounding tax riddle:
The subject:Inherited a small bank account in Switzerland invested in a Non-American Fund in Swiss Francs.
Account owner :71 year old American born woman living outside of the USA since the age of 15.
Earnings of the fund:from 2008-2012 the total profit on the invested sum was 150 CHF(Swiss Francs)
=equivalent of 170 US $.
Now the riddle:
how much taxes would you imagine are due and fair on those 170$
100 $ ?
200$ ?
500$ ?
WRONG!
4668 US$
That’s the figure the US tax adviser came up with!!!!!
No kidding!!
I am that woman.
For clarification:
-Since the age of 15(when I left the USA with my parents)I have been 2x again in the USA.The last time was 22 years ago.
-I have no assets in the USA,never earned a single dollar there,and have no social security.I have no family there either.
:ie I have no benefits what -so -ever from any taxes the IRS wants me to pay.
-The account is in Switzerland because my parents lived in Switzerland.
-I personally live 50 years in Israel where I studied,married,worked and retired.This is my home.
PS:I am contemplating giving up US citizenship:I can’t afford to be an American
PS on previous comment.
In addition to the sum what my tax advisors say I owe,there’s of course their added 2000$ fee. As to previous IRS:I never knew about citizen-based-taxation.
This September, UBS Switzerland sent out a letter telling US person (persons with US domicile or US citizenship and/or holders of US Green Cards) that they can no longer keep funds in their Swiss retirement accounts. In Switzerland these are known as 3rd pillar accounts and are equivalent to IRAs in the US.
In particular, Clause 7 of the new UBS regulations reads:
7. US persons
Accountholders may not invest in securities if they are deemed to be US persons (US citizens, residents or taxpayers).
If (UBS) learns that the accountholder is a US person holding securities, the Foundation will instruct that accountholder to sell the securities within 30 days. If the sale does not take place within this deadline, (UBS) will issue a sell order for securities and credit the balance to the UBS Fisca account.
——
Here are some views on this:
•One can understand that the banks do not want to report on US funds. It is very complex and totally different than how funds are reported and accounted in Switzerland.
•Will Canadians face the same conditions and no longer be allowed to have funds?
•In one sense, it is good that the bank will not let US persons have PFICs. Taxes on PFICs can more often than not be higher than any gain in the fund, due to exchange rates and the way PFICs are taxed. One can be hurt very badly if one owns a PFIC. (See the case of JN above.)
•For anyone who wants to renounce, they should renounce before their fund account is converted to cash. They may suddenly find themselves paying huge US PFIC taxes on funds that were sold. If that had thought they could keep this account after they renounced, the timing is critical to renounce now.
J.N. If your advisor is entering you into the OVDI OVDP read up, and reconsider for the STreamlined programs or other options. Some other people have experiences to share with that.
@J.N.
Trust me, you are not alone. Any US citizen who had CHF denominated assets over that time period will have “benefited” in eyes of the US Treasury as a result of the severe depreciation of USD against CHF. It is one of the many injustices of citizenship based taxation.
If you are contemplating renunciation in the near future, it may be worth investigating with your tax adviser the default treatment for PFICs (excess distribution regime) as opposed to the mark to market regime. Under the excess distribution regime, only the dividends are subject to US taxation and not the “total USD gain” produced by the mark to market method (which is likely where your US tax liability results from). The excess distribution regime would likely reduce your US tax liability substantially. If you intend to maintain US citizenship, excess distribution method is a truly horrible option.
Perhaps the BBC journalist would be interested in breaking the story about the large disparity (CLN gap) between the number of renunciations/relinquishments published by Treasury compared to the number of renunciations published by the FBI, along with State Dept declining a freedom of information request for the number of CLNs it has issued due to lack of statistics (hmmm).
The Obama Admin has an interest in under reporting the numbers of Americans pulling the plug. It makes FATCA look bad.
@J.N., as others pointed out, do not enter OVDI. OVDI is only for tax cheats. You are not a tax cheat, so OVDI is not for you. If your tax advisor advises you to enter OVDI, then find a new tax advisor or contact the IRS directly. Maybe you can get help from TAS: http://www.taxpayeradvocate.irs.gov/Individuals/Get-Tax-Help
Also, if you can, go to http://www.bbc.co.uk/news/magazine-24135021 and submit your story. Hopefully, BBC will write about it.
There is nothing wrong with renouncing US citizenship and many here will be happy to offer advice. Just post any questions that you might have here: http://isaacbrocksociety.ca/relinquishment/ You might also be able to get in contact with some other individuals living in Israel who were in a similar sitaution.
the content is regurgitated in shortened for in Swedish at
http://mobil.dn.se/ekonomi/amerikaner-avsager-sig-medborgarskap/?brs=d
There is an email address of the author which I have already taken advantage of—anyone else may feel free to chime in to that email address
shortened form
@ Not that Lisa!
NTL wrote: ” This September, UBS Switzerland sent out a letter telling US person (persons with US domicile or US citizenship and/or holders of US Green Cards) that they can no longer keep funds in their Swiss retirement accounts. In Switzerland these are known as 3rd pillar accounts and are equivalent to IRAs in the US. ”
This is far more than the bank simply “protecting itself”.
This is retribution. This is an embargo. This is an opening salvo in the upcoming FATCA trade war (unwittingly?) declared upon the world’s financial institutions.
War begins with threats and demands. The threats of payment withholding and the demands that banks must violate their own country’s laws, and countries must degrade their financial privacy laws to comply with FATCA, has launched a trade war. The logical initial response is embargo.
And the prognosis for the next few years is worse. Wait until the first time there is some documentation controversy (or a simple screw-up) and US funds are withheld from a legitimate foreign payee they are due to. Wait until the first time a FATCA IGA’s so-called “reporting reciprocity” is refused by recalcitrant US bankers and lawmakers. If these events co-coincide with the Fed’s inevitable abandonment of its quantitative easing policy, and Congress manages to kick the debt-ceiling can down the road for another year, it could create “perfect storm” conditions for financial melt-down.
Anybody stockpiling food and buying gold yet?.
Further to NTL’s note about Swiss Banks closing 3 pillar accounts…
If Canadian financial institutions waned to bring the FATCA situation to a fast political boiling point, they could simply eject all account holders with an US tie. Hundreds of thousand of account closures would get attention.
However, in probably the vast majority of accounts, Canadian banks have NO record of account holders’ birthplaces.
So a front line defense is: refuse any request to disclose birthplace or citizenship other than Canadian. If asked for ID, present drivers license, health card (where allowed) or Canadian citizenship photo card. If a bank queries place or birth or citizenship other than Canadian, tell them you consider the request unlawful. An enhanced drivers license is proof of Canadian citizenship that does not display place of birth. If a bank asks if you are a US person, possible counters are:
– “I am a Canadian person, I am a Canadian citizen (or permanent resident if not citizen) residing in Canada. I am confused by your question. Are you asking me what my national or ethnic origin is?”
– “Are you also going to ask me if I’m a Chinese person (or Irish person, or Italian person, etc)? And if not, why do you think its OK to ask about my national origin?”
Not That Lisa, I fully expect the Canadian banking/financial industry to close accounts and put some retirement and investment vehicles off-limits to USC’s regardless of any IGA or understanding with the Canadian govt. It simply is too risky for them not to.
It will come and the only remedy for USC’s is dumping American status. We haven’t been left with any other viable long term options because for most of us, repatriating isn’t possible.
Just got a note from my brother in California.
The BBC article is one of top links at the Drudge report
http://www.drudgereport.com/
(In his email my brother said he was proud of me. Damn near made me cry…)
@YogaGirl –
I could be wrong, but I think (unlike in Europe) dropping USPs’ Canadian accounts would be too large and controversial a project for a financial institution to take on – it just affects too many people. Plus it would certainly be illegal.
@A broken man on a Halifax, another difference might be that banks in Canada may fear individual lawsuits, while banks in Europe fear US lawsuits. For example, this article talks about why hospitals reject American and Canadian clients: http://www.tagesanzeiger.ch/wissen/medizin-und-psychologie/Das-Unispital-fuerchtet-sich-vor-Amerikanern/story/25955864
Here is the Polish version:
http://wiadomosci.gazeta.pl/wiadomosci/1,114881,14682432,Coraz_wiecej_Amerykanow_zrzeka_sie_obywatelstwa__Przez.html
Robert Stack didn’t convince them:
@Victoria
You rock.
The vietnamese edition:
http://www.bbc.co.uk/vietnamese/world/2013/09/130927_us_citizenship_givenup.shtml
Russian:
http://www.bbc.co.uk/russian/international/2013/09/130926_us_citizenship_give_up.shtml
Romania:
http://www.hotnews.ro/stiri-international-15672029-bbc-renunta-americanii-cetatenie.htm
Some interesting comments: