AMSTERDAM, Netherlands – 2020 was a record year for Americans giving up their citizenship, according to the experts and tax specialists of Americans Overseas.
- A record 6,705 Americans gave up their citizenship in 2020;
- A 260 percent increase from 2019 when 2,577 Americans gave up their citizenship;
- Renunciations triple despite US consulates being closed for large parts of the year due to COVID-19;
- This is the highest year on record; the previous record was 5,411 cases in 2016.
There are an estimated 9 million U.S. Americans living overseas. Every three months the US government publishes the names of all Americans under the IRS rules (section 6039g), who give up their citizenship. 2020 saw 6,705 Americans renounce their citizenship, 260 percent more than 2019 when 2,577 Americans renounced.
This number possibly would have been higher if US embassies worldwide had not been closed for large parts of the year due to COVID-19 regulations. If this trend continues 2021 renunciation numbers will be record-breaking.
Surprisingly enough, it’s not only politics that drive renunciations but also a law called Foreign Account Tax Compliance Act (FATCA). This law forces banks outside the US to report all American account holders under threat of astronomical fines. Banks now want to rid themselves of US clients as they pose a liability. Many Americans living outside the US are therefore forced to renounce and provide a Certificate of Loss of Nationality (CLN) to keep their banking services.
US citizens that renounce must pay a $2,350 government fee and appear in person at the US embassy in their country of residence. In addition, a complete tax return must be filed and exit tax might be owed. Despite these obligations, there has been a growing trend of US citizens renouncing.
“A law intended to catch tax evaders inside the US is now dragging innocent Americans living outside the US down. Lobbying efforts by the EU have so far not led to any change in policy by the US,” says Daan Durlacher, partner at Americans Overseas.
“The onerous and costly tax reporting obligations also play a big role. People with a US citizenship or Greencard must file their taxes regardless of where they live in the world every year. They also need to report every single bank account (FBAR), even if they are only authorized to sign, which feels intrusive for many.”
Ironically, the US stimulus checks of $1,200 and $600 are also being used towards the cost of renouncing – a difficult, irreversible decision with a profound impact on an individual’s life, especially in these difficult, special times.
Americans Overseas spoke to US citizens worldwide who are looking to renounce their citizenship, and expects a huge increase again when the US embassies open up again full time.
