2020 was a record year for Americans giving up their citizenship, according to the tax specialists of American Overseas.
At least 6,705 Americans gave up their citizenship in 2020, a 260% increase from 2019 when 2,577 Americans renounced their citizenship. Tax experts add the number would have been higher if U.S. Embassies worldwide had not been closed for large parts of the year due to COVID-19 regulations.
More than 9 million U.S. Americans are living overseas. Every three months, the U.S. Government publishes all Americans’ names under the IRS rules who give up their citizenship.
What’s surprising about these figures is that politics is not the only factor for people denouncing their citizenship. A law called the Foreign Account Tax Compliance Act (FATCA) is the other reason.
FATCA requires banks outside the U.S. to report all American account holders and if they don’t comply, these banks face astronomical fines. The banks now want to wash their hands with U.S. clients who they see as a liability. Americans living outside the U.S. are being forced to renounce their citizenship and provide a Certificate of Loss of Nationality to keep their banking services.
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“A law intended to catch tax evaders inside the U.S. is now dragging innocent Americans living outside the U.S. down. Lobbying efforts by the EU have so far not led to any change in policy by the U.S.,” Daan Durlacher, partner at Americans Overseas, said in a statement.
Giving up U.S. citizenship comes with a hefty price tag. A fee of $2,350 must be paid and “an exit” fee may be owed.
Despite the costs, a growing number of people are renouncing, and Durlacher expects more in 2021 as embassies reopen.
