Dubai: Two-thirds of Americans who live outside the US. are tempted to renounce their US citizenship in response to the controversial Foreign Account Tax Compliance Act (FATCA), according to a recent survey by deVere Group, an independent financial advisory firm.
In a global poll, deVere Group asked more than 400 of its American expatriate clients: “Would you consider voluntarily relinquishing your US citizenship due to the impact of FATCA?”
Cumulatively, 68 per cent of respondents answered that they had ‘actively considered it’, ‘are thinking about it,’ or ‘have explored the options of it.’ while 17 per cent said they would not consider relinquishing their US citizenship and 15 per cent did not know.
The survey findings are supported by actual numbers. The number of American expatriates relinquishing their US citizenship surged in the second quarter of 2013, to 1,131 cases, compared with 189 in the same period in 2012.
The number of US citizens renouncing citizenship have climbed since it was revealed that the co-founder of Facebook, Eduardo Saverin, renounced his US citizenship to become a resident of Singapore, and that American icon Tina Turner has become a Swiss citizen.
Countering tax evasion
Designed as a tool to counteract tax evasion, the Foreign Account Tax Compliance Act has resulted in additional reporting requirements for all US citizens overseas. It will also mean substantial compliance obligations for all non-US financial institutions worldwide.
“This is a remarkably high figure. However, I am not too surprised as it is our experience that Americans — at home and abroad — are becoming increasingly aware of the far-reaching, unintended adverse affects of FATCA,” said Nigel Greene Vere Group’s founder and chief executive.
Under the FATCA regulations, all foreign financial institutions are required to register with the Internal Revenue Service (IRS) by early next year. Most of the banks operating in the UAE have already started to comply with the IRS demands.
Bankers say all banks in the UAE will be forced to comply as they must rely on US correspondent banks to clear dollar denominated transactions. Non compliance could invite sanctions that could include withdrawal of US dollar clearing rights with correspondent banks.
“Withdrawal of dollar clearing rights with correspondent banks could cripple banks in the UAE since the dirham is pegged to the dollar. I don’t think any bank would risk such a scenario,” said the treasury head of a local bank.
What it means for UAE banks
FATCA provisions will force non-US financial (and certain non-financial) institutions to provide the IRS with information about accounts held by Americans. Reporting will include the name, address and taxpayer identification number of each US account holder; the account number; account balance and value; the account’s gross receipts and gross withdrawals or payments; and other account related information requested by the IRS.
The reporting mandates are scheduled in stages, with applications to join the IRS programme commencing January 1, 2013; participating banks will be required to document all new accounts by June 30, 2013; search for existing accounts is to be completed by June 30, 2014, and the first reporting date for accounts will be September 30, 2014.