The second quarter of 2013 saw a record number of Americans renouncing their U.S. citizenship, jumping from 189 in the second quarter of 2012 to 1,131 this year.
Although individuals' reasoning for renouncing citizenship is not required, an oft-cited reason appears to be taxes. New measures to track and tax American assets overseas were implemented by the IRS last year. The Foreign Accounts Tax Compliance Act (Fatca) requires foreign banks to release information to the IRS pertaining to assets of American taxpayers, and was put into place to combat the government’s estimated $100 billion losses in tax evasion by U.S. citizens abroad. Experts believe the new law, with an implementation date of July 2014, to be one of the main contributors to this year’s record.
“With the looming deadline for Fatca, more and more U.S. citizens are becoming aware that they have U.S. tax reporting obligations,” explained Matthew Ledvina, a U.S. tax lawyer at Anaford AG in Zurich. “Once aware, they decide to renounce their U.S. citizenship.”
Although the number of renunciations is but a fraction of the estimated six million Americans living abroad, it is still marked increase, as the number of Americans renouncing citizenship in the first two quarters of 2013 has already surpassed the number of renunciations in all of 2012.
“When I became an immigration lawyer 30 years ago, people really were excited about going to America,” said Eugene Chow, the principal of Chow King & Associates. “Now, more than half of my clients are people thinking of other alternatives rather than people seeking to immigrate to America.”