Panama Forum

panamajames
Joined 2012
Posts: 5096

8 years ago

Renouncing Your US Citizenship

8 years ago

A Record Number of Americans Are Renouncing Their Citizenship. The trend likely is accelerating because of a 2010 law that gives the Internal Revenue Service unprecedented access to U.S. citizens’ foreign bank accounts, said Stephen Flott, an attorney at Flott & Co. P.C. in Arlington, Virginia, whose clients include expatriates. The U.S. is the only country within the Organization for Economic Cooperation and Development that taxes citizens wherever they reside.
“If they have no real desire to work or live here, then the question for them is: What’s the point?” Flott said. “For those who feel no real affinity to the U.S., it’s a no-brainer.”
People giving up their nationality at U.S. embassies rose to 1,062 in the fourth quarter from 776 in the year-earlier period, according to Federal Register data. That’s the highest quarterly total since the second quarter of 2013, according to Bloomberg News calculations based on records starting in 1998.
The annual total reached 3,415 in 2014, from 3,000 in the year-earlier period, according to Federal Register data. The five highest totals have been recorded since the U.S. Congress passed the 2010 law.
There are an estimated 6 million U.S. citizens living abroad. More than 10,000 Americans living overseas have given up their passports over the past five years.
The U.S. has increased efforts to catch tax cheats after UBS AG paid a $780 million penalty in 2009 and handed over data on about 4,700 accounts. That has led some banks to forgo doing business with people who have ties to the U.S.
One of the primary U.S. moves took effect last year as asset-disclosure rules under the Foreign Account Tax Compliance Act kicked in. The measure, known as Fatca, requires U.S. financial institutions to impose a 30 percent withholding tax on payments made to foreign banks that don’t agree to identify and provide information on U.S. account holders.
It allows the U.S. to scoop up data from more than 77,000 institutions and 80 governments about its citizens’ overseas financial activities.
In establishing the 2010 Fatca law, Congress and President Barack Obama in effect threatened to cut off banks and other companies from easy access to the U.S. market if they didn’t pass along such information. It was projected to generate $8.7 billion over 10 years, according to the congressional Joint Committee on Taxation.
The reporting requirements under Fatca and foreign banks’ actions to avoid penalties made many people aware of U.S. tax obligations they didn’t know they had, Flott said.
“They wake up one morning and learn about citizenship taxation and birthright citizenship and the two together create for some people a real problem,” he said.
Obama this month proposed making it easier for those who the U.S. considers “accidental” citizens to stay out of the U.S. tax system. What the administration refers to as accidental citizens include people born in the U.S. while their parents were visiting the country from abroad or individuals whose only connection is a parent who was a U.S. citizen.
Under the proposal, such people would have to give up their citizenship in 2016 or 2017 and make sure they had complied for the past five years with federal tax laws that would have applied if they were U.S. nonresidents.
The special rules exempt those people from U.S. taxes and from the mark-to-market tax imposed when people expatriate, which taxes people as if they sold their assets before turning in their passports.
The Obama administration proposals would be available only to dual citizens who haven’t lived in the U.S. since age 18 1/2 and haven’t had a U.S. passport -- except for one they used to leave the U.S.
The proposal was part of Obama’s 2016 budget plan and any changes would likely have to be passed by Congress.

Kovalenko & Vera Attorneys at Law in Panama

Allianz Care

Flexible solutions allow you to tailor your cover to meet your needs and budget. Use Promocode: LIFE10 and get 10% off your international health insurance for life!
Get Quote

Allianz Care

Flexible solutions allow you to tailor your cover to meet your needs and budget. Use Promocode: LIFE10 and get 10% off your international health insurance for life!
Get Quote

Living in Panama Guide

Our Guide to Living in Panama is a perfect primer for readers interested in Panama. Covers healthcare, cost of living, best places to live, residency, visas, real estate, moving tips and the pros and cons of living in Panama.

Panama Forum
Join our Panama forum to meet other expats and talk about living in Panama.

Contribute
Help other expats and newcomers by answering questions about the challenges and adventures of living in Panama.

Best Places to Live in Panama

If you're dreaming about living in Panama, here are the 15 Best Places to Live in Panama in 2023.

Healthcare in Panama

Expats have differing opinions about healthcare in Panama. Many advice against public hospitals and healthcare, but some recount good experiences. This article covers public vs private healthcare, cost of healthcare, obtaining prescription medications and much more.

Cost of Living in Panama

Expats in Panama enjoy a relatively low cost of living. However, it's important to do your research to make sure you'll actually enjoy those saving while creating a high quality of life as an expat in Panama.

Moving to Panama Guide

Do you have to buy a round trip ticket when moving to Panama? How difficult is it to bring my dog? Should I buy a home in Panama? Can I find health

Real Estate in Panama

Real estate listings in popular cities and towns in Panama.

Pros & Cons of Living in Panama

Take off your rose-colored glasses and learn what expats have to say about the biggest challenges and the greatest rewards of living in Panama.

Retiring in Panama

Advice for people retiring in Panama.

Panama Visa & Residency Guide

This article covers the ins and outs of the most common tourist and residency visas that expats and global nomads obtain when moving to and living in Panama.

10 Tips for Living in Panama

If you've recently arrived in Panama, here are 10 tips for digital nomads living in Panama.

Additional Information:

Visit our Panama Index for a Full List

Allianz Care

Flexible solutions allow you to tailor your cover to meet your needs and budget. Use Promocode: LIFE10 and get 10% off your international health insurance for life!
Get Quote

Allianz Care

Flexible solutions allow you to tailor your cover to meet your needs and budget. Use Promocode: LIFE10 and get 10% off your international health insurance for life!
Get Quote

Contribute
Help others in Panama by answering questions about the challenges and adventures of living in Panama.