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Record-Breaking 3,000 Americans Ditched Passports in 2013 (FATCA)

Posted on the 25 March 2014 by Angelicolaw @AngelicoLaw

In 2013, a record-breaking 3,000 American citizens and green card holders renounced their citizenship. That’s according to data reported by CNNMoney. This number represents a significant spike – nearly tripling the average number of new expatriates over the previous past five years.

Analysts suggest that the reason for the rush to expatriate is to escape the “burden” of American tax laws. Support for this argument is clear. When the Foreign Account Tax Compliance Act (FATCA), which targets overseas tax evasion, went into effect in 2010, the number of Americans renouncing their citizenship jumped from 742 in 2009 to 1,534 in 2010.

The goal of FATCA is to recoup what the U.S. government says is hundreds of billions of dollars in taxes on American assets overseas. The law requires foreign financial institutions to disclose to the U.S. government financial information about their American customers who have foreign assets held at their institutions that are valued in excess of $50,000. Additionally, other provisions require Americans to disclose foreign bank accounts if they hold more than $10,000. These are very low thresholds for wealthy Americans.

In practical terms, if an American lives in Brazil with a permanent visa, his or her assets are subject to taxation in both the U.S. and Brazil. Even though Americans living in Brazil are able to claim a $97,000 exclusion when they file their U.S. tax return, it’s relatively easy for Americans living abroad to earn much more than the exclusion.

To make matters worse, many foreign financial institutions are closing the accounts of Americans rather than incurring the time and expense associated with complying with FATCA and the penalties for non-compliance. This leaves many Americans struggling to access foreign banking services.

Living abroad also makes tax filing more complex. There are more rules to understand and more forms to file. For instance, Americans living in Brazil must file a Report of Foreign Bank and Financial Accounts detailing their ownership of foreign financial accounts of any kind.

In an attempt to protect their wealth, many Americans are choosing to expatriate to Brazil. They are finding that the cost of living is less expensive even as the Brazilian real strengthens against the dollar. They also find the weather and the more relaxed lifestyle more appealing.

As more Americans flee tax burdens in the U.S., Brazil looks to benefit from the influx of foreign capital and human resources.

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