Overseas Pension May Mitigate FATCA Fallout For US Expats

By ExpatBriefing.com Editorial 23 May, 2014

More than three-quarters of American expats and green-card holders who have taken out a supplementary overseas pension contract reported in a recent poll that they are "satisfied" to remain a US citizen despite the United States's incoming Foreign Account Tax Compliance Act (FATCA) rules.

FATCA, enacted by the US Congress in 2010 and taking effect on July 1, 2014, is intended to ensure that the US obtains information on accounts held at foreign financial institutions (FFIs) by US persons.

Of 361 overseas-based American clients of financial consultancy DeVere Group surveyed, 78 percent who have created a tax-qualifying, FATCA-compliant pension plan said they would "no longer consider giving up US citizenship" to reduce the burden of the incoming tax law. These findings buck the official trend, the firm said.

According to Treasury Department figures published in the Federal Register, 1,001 Americans gave up their passports or green cards in the first quarter of 2014, an increase of 47 percent on the same period last year. This number was only surpassed in Q3 of 2013, when 1,130 passports were handed back. It is expected that a record number of US citizens will give up their passports this year. More than 3,000 are forecast to do so before the end of 2014.

FATCA has a host of serious unintended consequences for Americans living overseas, DeVere explained. These include being rejected by non-US financial institutions, such as banks in their country of residence, and onerous and expensive new reporting requirements for anyone with assets exceeding USD50,000.

Nigel Green, founder and chief executive of DeVere Group, said: "The Treasury Department's figures seem to highlight a clear correlation between the increase in expatriations and growing awareness among Americans of FATCA's highly contentious, burdensome and expensive requirements."

"The official statistics make for depressing reading. It is our experience that Americans, quite rightly, are loath to give up their US passports - they don't want to sever these ties, but do so as they feel there's no viable alternative."

He continued: "Against this backdrop of soaring US passport relinquishments, it is extremely encouraging that the overwhelming majority of those we polled who have taken out an additional overseas pension contract... told us they were 'satisfied with the action taken and that 'they would no longer consider giving up US citizenship.'"

"Among other benefits, a supplementary overseas pension contract recommended for US taxpayers with assets abroad, will allow the holder to permit a qualifying expat to make annual contributions to a pension fund over and above USD51,000 - which is not possible within the current US tax-approved regime; to take advantage of tax-deferred investment growth; and to benefit from the opportunity to invest freely into Passive Foreign Investment Companies (PFICs) without incurring US tax penalties and burdensome tax reporting procedures," DeVere said.

There are an estimated 7.2 million American expatriates and 13 million green-card holders.

Tags: Expatriates | Foreign Account Tax Compliance Act (FATCA) | Tax | Investment | FATCA | Law | United States | Penalties | Compliance | Expats | Investment | Pensions | Visas And Passports | Invest | Investment | Pensions | Tax |


News Archive