As a citizen of Uruguay I find the last paragraph very funny:
“I feel about the same obligation to file US tax papers as you would if the supreme court of Uruguay all of a sudden decided you were a citizen and had to file a tax return there,” he tells the Guardian.
By the way, Uruguayan citizenship is VERY easy to acquire. American expatriates (and dollars :) ) welcome here :)
Edit: easy as in requirements. There's a lot of paperwork involved.
"It will take approximately 3 years for a married couple, with a good amount of time spent in country. For singles, it will take 5 years – with a similar amount of time in country. This makes Uruguay more attractive for married couples rather than a single applicant.
Uruguay wants you to prove your residence by documentation – sometimes odd documents such as a doctor’s appointment slip, a library card. The idea is that they really want you to prove you are actually living in the country. This documentation is again, not always what you might expect – so document everything and when in doubt – shoe box it.
After you have received permanent residency, you should talk to an abogado about citizenship and travel document options. Again, permanent residency is required to be able to receive any kind of travel documents. Further, a cedula is somewhat considered a travel document as well and can allow you to get around South America in many instances.
Strong Travel Document
A Uruguayan passport is one of the strongest in the world. Under this passport, you can visit Europe visa free, and most Uruguayans have a 10 year American visa."
As a fellow Uruguayan, I want to add that citizenship comes without too many obligations; no military service or anything like that. The only one I can think of is that voting is compulsory.
On the other hand, I wouldn't recommend living in Uruguay; I had very good reasons to leave and I don't see myself returning anytime soon. And I'd argue any European passport is better than an Uruguay one - you can freely live and work in Europe, and you can visit the US without any visa.
Totally agreed on the European passports being overall superior (although some do come with obligations like military service for an Austrian passport for example), but they're much harder to obtain (I've been denied German citizenship).
I've read about your reasons for leaving (security), and sadly, I have to agree that they're still an issue (and I'd love living in Switzerland).
I think the risk can be minimized though. Ideally I'd want to live in Punta del Este or Maldonado rather than Montevideo, and the countryside is still pretty safe (though a computer nerd might die of boredom there :P ).
If its not too personal can you share some general information what nationality you have or had while applying to the German citizenship and what were the main reasons it didn't work out.
My grandfather was born to Prussian parents which came to Uruguay and then back to Prussia, but he was born in Uruguay, and lived in Uruguay from his teens onward.
When he went to obtain a German citizenship, he was asked to bring in a lot of additional paperwork (a church birth certificate being one I think). One of my uncles went to Germany to try to obtain it, but it was in vain.
I wasn't going to be granted German citizenship unless my grandfather, and then my father, were granted German citizenship.
My grandfather was as German as they come, but due to those quirks he wasn't granted citizenship, and so I wasn't able to.
Insecurity, basically. At some point during the last decade society kind of broke down, and the respect for human life was lost. I'm talking 12 year olds killing a store clerk in cold blood for 2 or 3 dollars, or worse [1]. This didn't happen just once; at some point there was a murder per day, in a country of three million people. The government, who are former terrorists [2] and based their campaigns on condemning the "repression" of the police, are ideologically incapable of being firm against all this (in fact, they're ideologically stuck in the 60s)
They have also given too much power to the unions, to the point that they can legally steal a factory from their owners, for example (in a nutshell, occupying it until it goes bankrupt, and then assuming control "to save jobs") Also, just before their first term in power, Uruguay had just came out of a terrible economic crisis that affected the whole region; basically, Argentina fell, and Uruguay is too small and dependent to have avoided it (and the old government was blamed). During the last decade the whole region has improved, so the economic situation in Uruguay is quite good right now (and the new government takes credit). But the worst thing is the way they're squandering this money in sort-of-well-meaning but very badly implemented "social" policies, so when the "up" economic cycle turns into a "down" economic cycle and the easy money runs out, there will be no reserves, a disfunctional and violent society, truly pathetic education level [3],... it's a ticking bomb.
You can become a U.S. citizen and maintain citizenship of your country of birth(or others your are holding)if the country wasn't China and a few others listed in the link I have provided.
Half of my immediate family have become U.S. Citizens and maintained their other citizenships.
I was told by a friend who's getting U.S. citizenship you have to take an oath renouncing other citizenship.. here it is:
"“I hereby declare, on oath, that I absolutely and entirely renounce and abjure all allegiance and fidelity to any foreign prince, potentate, state, or sovereignty of whom or which I have heretofore been a subject or citizen…” from the Oath of Allegiance "
Edit: can you ask your family if they took that oath, or is the information obsolete? Until now, I thought it was an actual requirement to renounce other citizenships.
That is still the oath they make you take, but it has no legal consequences. You take it, eat the brownies that the VFW baked for your naturalization ceremony, and happily keep both passports.
The US doesn't seem to care - they still treat their citizens as citizens, and sort of ignore any other citizenship. Unless there's a real conflict, like joining a foreign military.
The underlying problem behind all of this is that the USA's policy on taxing non-resident citizens is, fundamentally, absurd.
As a permanent resident, it's the one thing that gives me pause about applying for citizenship (I know that the same rules apply to me whilst I'm a permanent resident, but I'm concerned about what happens in the future if I decide to leave the USA).
As a permanent resident, you have a "do or die" date in your life.
If you have the green card "in" at least 8 of the last 15 years, you have the privilege of paying the exit tax when you give up the visa status. (Well, you pay extra tax only if you are "rich" for certain definitions of "rich". You will certainly have a giant mountain of tax forms to fill in.)
If you terminate your green card before that magic moment of holding the permanent resident visa "in" 8 of the last 15 years, then you can exit the United States cleanly and easily, with minimal paperwork and no risk of extra tax.
That's why I tell people who want to come to the USA to avoid getting the permanent resident visa and get a different visa status instead.
Disclaimer. I am a lawyer. I am an international tax lawyer. My office does a LOT of expatriation cases where we log people out of the U.S. tax system and the U.S. nationality system.
It's absurd because no other country does it that way - the United States, despite the rhetoric, treats its own citizens worse in this aspect than any other country the rest of the civilized world.
If other countries behaved the same way, it wouldn't be so ridiculous- but they don't, so it is.
It's not that simple. If you want to live overseas long term you may end up paying quite a bit in tax, for example on retirement savings and distributions, investing, running a business. These things are all COMPLETE nightmares for a US citizen living abroad, even in a country like Australia.
Are you double taxed? Many countries have reciprocal taxing agreements with the U.S. whereby you get credits for foreign taxes. That's how it worked when I was a U.S. citizen in Canada.
If you own two houses, just because you aren't living at House A right now doesn't mean you don't need to pay upkeep, and doesn't mean you aren't deriving benefit from it.
Thought of differently- expats expect to be able to vote, right? Is it fair and reasonable for someone who is categorically excluded from paying taxes, to be allowed to vote?
This implies taxes are fair, that paying taxes is a requirement for voting, like buying your voice, and that voting would give any benefits in return. Yes, of course it is fair to vote when the vote could indirectly decide laws that make you a criminal in some way or another and no, it is not fair to be taxed, especially if you don't use the majority of infrastructure that taxes are supposedly needed for.
I get where you are coming from, sure there are arguments for it, but it's not like there are none against it, either.
I was personally bit by this (FBAR non-compliance). I worked abroad and was unknowingly violating it; found out about it from reading the news and hired a pro to extricate myself from the situation.
The bank account held five figures. The cost to come into compliance was low five figures. The potential penalties were easily high six figures. It was much larger than the either (a) my total earnings from 4 years abroad or (b) the maximum amount the account had ever held. I believe my tax guy was on the cheap end too.
I'm still angry about it; I feel like I was guilty of nothing more than ignorance. IMHO this is case of strict policies that were intended for rich tax evaders. And they're being retargetted at millions of expats & foreign nationals.
You're right on all accounts except the intent of the policies. The polices were intended for people like you. They are popularly SOLD as being against "rich tax evaders", but government, always and everywhere, wants more and more control, and that's why the requirements apply to people with 5 figure bank accounts rather than 8.
Unless sufficient checks are in place, governments will grow their power and control every year, and this is one of the ways they do it.
The more laws you unknowingly violate the more vulnerable you are to capricious prosecution.
Aaron Swartz is a good example of this-- while he did break a legit law (arguably) the penalties and the illegitimate laws thrown at him were designed to give the prosecutors and the courts the power to effectively disappear anyone they want.
If you think FACTA is bad, look at money laundering. Moving money between your checking and savings and a third account is "money laundering" under the federal law.
Might be the case! Here was my impression though (based on what I read after the fact):
The laws were always on the books but rarely enforced. Only once the UBS thing broke did the IRS start cracking down. Then the OVDI happened, which presumes guilt (ie intentionally evading taxes) from the get go. So based on the timing, I always thought things got to the point they are because of swiss bank accounts and tax evaders. And I thought penalties were structured the way they were so the IRS could throw the book at those guys when they were caught.
You are not the only person angry. The IRS took me for a lot of money because my wife had mutual funds in the UK from a previous job earned before we ever entered the states. PFIC tax rules are meant to be a punishment and the OVDP penalties just add on top of that. All the gains gone and a chunk of the principle.
We term this the IRS jackpot. Many people talk about this here:
http://isaacbrocksociety.ca
You can help fund attacks against this stuff here:
How could you not have known about this? I knew about this before I went abroad, soon after I graduated from university, and I'm not a sophisticated person about most tax issues.
Phunge,
When you say you were bit by fbar penalty - Did you enter the OVDI program?
OVDI was really meant only for those who willfully evaded taxes and needed criminal protection. However, till recently that was the only option in the book for negligent minnows as well as criminals. Now there is the streamlined program.
This story appears on HN like clockwork every 3 months. Why? Because the Federal register publishes quarterly figures, the articles write themselves with very little work, and there's a large contingent of people on HN who think taxes are evil. I do think the policy of taxing US citizens on overseas earnings is unwise and FACTA is somewhat unworkable, but it's worth noting that taxation of Americans living abroad (and at a higher rate, to boot) dates back to 1864, when it was introduced to defray the costs of the civil war.
http://www.treasury.gov/resource-center/tax-policy/Documents... has all the information, and you can see the little quarterly blip on the search results graph as newspapers run the story reliably every 3 months. There has been a distinct uptick since the passage of FACTA but applications seem slightly down this year compared to 2013.
This has nothing to do with thinking taxes are evil. This has everything to do with the fact that the US tax regime on overseas Americans makes life miserable for those expats. Oftentimes you finish up paying thousands of dollars for expensive tax help* only to demonstrate that your tax liability is $0 because foreign tax credits cancel out your foreign tax obligations. Besides all the difficulties with opening bank accounts as noted.
The solution is simple: the US needs to join the remaining 99% of the developed western world and switch to residence-based taxation instead of the current citizenship-based regime. In other words you tax people within your physical borders only (citizen or not), but suspend their tax obligations when they leave for as long as they leave, unless they still have income-producing assets within the borders of your country.
* Taxes overseas are not something you can just whip up Turbotax to handle. You oftentimes need to reconcile foreign tax statements with your US ones to compute tax credits. Worse, the foreign tax ones are rarely due on the same deadlines as the US ones, and foreign currencies need to be converted and so forth. The whole thing is difficult for most people but almost completely unworkable for entrepreneurs owning corporations overseas, owing to the need to file obscure and complex Controlled Foreign Corporation tax forms. Budget around $5,000 in tax prep fees per corporation for those, even if your corporation is a dormant LLC with no money passing through it.
I agree completely, but there are a lot of people on HN who live in the US, have no plans to depart, and just like to grumble about government overreach and upvote threads about it, as you can see elsewhere in this thread, and in previous threads on the same subject.
In the same way there are threads twice each year about the change to/from daylight savings time which get lots of votes from people who hate the time change and wish it were abolished, including myself - look out for the next one in 5 weeks.
If you had dual citizenship (e.g. Canadian + US), do you even need to tell a bank about your US citizenship when opening an account?
Can't you just open it as if you were a Canadian only? Even your US SSN wouldn't be associated with it, so for all the US G and the bank know you're just someone with the same name and birthday.
As a random aside: The US Gov is practically the only country in the world who tries to collect income tax from US citizens living abroad. The fact that Americans who move away have to file US tax returns for the remainder of their life is bonkers.
> If you had dual citizenship (e.g. Canadian + US), do you even need to tell a bank about your US citizenship when opening an account?
If they bank (or its parent) wants to be able to do business in the US, yes.
This is part of the same overreach as insisting data resident in an Irish data centre, belonging to an Irish entity, is subject to the US courts in violation of Irish and EU law.
That's not a good analogy. Microsoft is not really an Irish entity just because it owns an Irish subsidiary. Microsoft has a valid argument, but omitting the fact of the parent entity being American is disingenuous.
> As a random aside: The US Gov is practically the only country in the world who tries to collect income tax from US citizens living abroad. The fact that Americans who move away have to file US tax returns for the remainder of their life is bonkers.
Hm, I can somewhat understand that? If I was moving out of Germany and got into trouble abroad, I would expect (and receive) help from the German consulate/government. Paying at least some taxes for that seems reasonable, as long as double taxation and all that is avoided.
If you get into trouble within a country where you have citizenship, another country where you also have citizenship won't intervene.
So for example, if you were a citizen in the US and Canada, and got into trouble in Canada the US would not assist you. However if you were on holiday in Canada or even a permanent resident then they would.
That is pretty standard international practice. That countries won't interfere with another country's interactions with its own citizens (regardless of the source of citizenship).
The US-UK got into quite an international spat a few years ago when the UK tried to intervene after a dual UK-US citizen got sentenced to death in the US.
True, but the grandparent did not say a word about dual citizenship, merely about Americans who moved abroad. I can understand issues arising from dual citizenship and I am personally not a fan of that being even an option to people, in part due to these issues.
I imagine it's more of a "check this box to verify you are not a US citizen" system. The bank could then charge your account fees if you lied and they had to deal with the IRS.
I actually think the US tax return laws are reasonable -- there have to be some obligations for citizens to go along with the rights they have.
Two reasons, first off the US government can request banks abroad put a hold on US citizen's money. Secondly if you ever enter the US they can hit you with fines and interest.
There are many people who do not even know they are US citizens!
Every kid of an expat may not know they are actually considered naturalized US citizens. In fact, the US Consulate won't even tell you the truth!
The US gov will make substantial efforts to help you if you're caught in a war zone. That's a big plus if you live or travel to dangerous areas. I'm a Canadian, but I've heard stories about people working overseas with other foreign workers. When things get bad the American's are quickly evacuated, other not so quickly.
Also if you ever move to the US you immediately, or at least very quickly, qualify for programs you never paid into. Medicare if you're old, in state tuition if you have kids, etc.
But US citizens living abroad have to file tax returns even when they don't exercise that right. They could live abroad for the remainder of their life and have to file (under IRS rules).
That seems like a very flimsy argument for why US nationals abroad have to file tax returns.
Something worth noting is that FATCA essentially makes it impossible for an institution to remain "FATCA compliant" if they have any financial relationship with a non-compliant entity. Sure, they can have such relationships, but the U.S. Treasury department can then impose a 30% penalty on any transaction that passes through a U.S. bank. Given that the vast majority of international payments are made in USD, that 30% penalty is going to be very painful for any bank that purposefully decides to be non-compliant.
The end result of that will be that the global financial system is going to be bifurcated into "compliant" and "non-compliant" institutions. Believe me, most banks/insurance companies/financial entities will find it worth their while to eventually become compliant.
The reason that more countries aren't complaining about this (and most are actually entering into bilateral enforcement agreements with the U.S. Treasury department) is that they'll then be able to get access to the same sorts of information on their own citizens that the U.S. is getting on their own as a result of FATCA.
And it imposes a large cost on non us citizens who have to pay for our uk institutions ro meet the cost of US regs out of our fees the Daly telegraph estimated that the cost of FACTA to uk investors with absolutely no connection with the USA was 1/2 a billion pounds.
As someone quite familiar with the situation, you're better off saying "Fuck you Intuit". They spend millions of dollars a year lobbying to keep the tax system complex.
It is nice the article mentions Spain. Here you can just give the OK via web signing with a personal certificate issued by the government. But we have a National Identity Document (direct translation from Spanish: Documento Nacional de Identidad) with a nice chip where we can store the certificate [1]. Cons: we must carry it any where we go and show it to the police on request. I believe in USA that would be unimaginable because... you know... government control.
BTW, thanks god Firefox supports client certificates and I sign from Linux.
> They spend millions of dollars a year lobbying to keep the tax system complex.
Not exactly. It wouldn't cost as much as Intuit spends on lobbying to keep the system overly complex. But Intuit doesn't want the tax code to get so complex that people are forced to seek outside help (yes, they make money from Lacerte and the rest of their Pro Tax division, but not as much as they do from TurboTax). And yet they don't want it to be so simple that you can do it on your own. They're seeking that perfect middle where you feel comfortable using software to prepare your taxes. It's a tenuous balance to maintain and why they have to spend so much on lobbying.
Why can it not be both? Congress only passes the Tax Code, the IRS on the other hand has a liberal mandate into how they go about doing their job. They are quite tyrannical when it comes to fees and penalties. They also don't need a court order to garnish your wages or confiscate your property.
Because focusing on the IRS ignores the fact Congress can alter the IRS's mandate at-will to remove any of the policies of the IRS that is considered "bad". The President and his appointees can alter things within the mandate.
Get angry at the people that make policy, not the people that enforce it.
Sure, the IRS could be nicer. However, as someone who had to handle a policy enforcement role from time to time...I know the people I had to enforce policy on hate me, personally. However, I'm just enforcing policy. That enforcement is basically an email saying "No, disregard what X told you because Y is current policy."
People at the bottom usually aren't assholes "just because". We become assholes because people get angry with us over stuff we have no control over [unless we quit].
Getting enforcers to quit or be fired is the general idea of focusing in on them -- if there are no enforcers then nothing is enforced regardless what the policy makers say. It's another solution to solving the problem of bad policy besides the one of changing the policy. One could argue its results. The strategy seems to make a lot of TSA employees feel bad, so the turnover there is quite high, but enough people need any job just to make ends meet that the overall effect to their workforce isn't very much. But this just suggests an alteration: focus on individuals of the loathed organizations, which has had success in the form of social justice warriors being quite successful at getting individuals, even "powerful", higher-up-the-ladder individuals, fired for things they've said or done.
If you don't fix the policies, they just hire replacements. You even admit it is how it works.
"The strategy seems to make a lot of TSA employees feel bad, so the turnover there is quite high, but enough people need any job just to make ends meet that the overall effect to their workforce isn't very much."
You also didn't think about the logical result of pushing out the people who would feel bad about bad policies. It means you leave only the desperate & the bad people running the organization. Well done! You've removed everyone with a hint of moral fiber and/or soul from the enforcement role. And then you'll be surprised when no decent person is there to help you when there is an issue.
If you read my comment carefully you'll see I don't advocate this strategy, I'm just exploring it. Extermination can be an attractive strategy, it just doesn't work very well against endless foes. The part you quote is sufficient for casting doubt on its efficacy -- that I didn't make the slam dunk of pointing out who's left seems irrelevant. Thanks for reminding me of that additional detail, though.
True but the IRS is also off the straight and narrow as they have gone after political opponents of the president, disappeared evidence in the ensuing investigation, etc. etc.
It was a keyword based list based on types of organization the IRS had the most issues with. The Democrats were hit in 2011. Years before this was an "issue". Oddly enough, the Republicans were fine with that but mysteriously they:
1) Ignore the non-partisan, non-political, and liberal groups that were targeted under the same policy.
2) Only complain about the targeting of potentially conservative groups.
And even if you claim "the IRS goes after political opponents of the president", you blame the President for not keeping them on a tight enough leash. You don't blame the people enforcing the Presidential policies.
One of which was stripped of their status. Of the targeted group, less than a third were Republicans. If you bothered to put any effort into researching it you'd turn up the keyword list that includes the keywords.
I'm not sure why I get downvotes because I don't do all the work for people making accusations.
This wasn't some witch hunt. Everything with potential political leanings as well as a number of other non-political categories were flagged. This was because of Citizens United and the fact people were pushing the boundaries.
You keep posting links that don't support your claims.
Let's see, from your first link: According to ThinkProgress's analysis of the heavily redacted "be on the lookout" lists, the IRS may have targeted a higher number of progressive groups than conservative groups overall.
Really? ThinkProgress, a left-leaning organization, did an analysis that showed they weren't targeting conservatives, in fact they were mostly targeting progressive groups.
Provide a decent source and we can have a conversation.
Fair perspective.
I would say the true blame lies with the people who support all of these evil laws, usually out of a belief that they will profit from them.
In Canada, people can put money into a tax-deferred retirement fund (RRSP); the income tax is paid only when the money is withdrawn (sometimes 30 or 40 years later). The US does not recognize the RRSP as deserving of a tax-deferred status, but as a regular savings account. (https://www.tnvisaexpert.com/articles/how-canadian-rrsps-tax...) Thus some dual US-Canada citizens suddenly have faced significant tax bills from the US. This includes people that have never set foot in the US since they were toddlers.
Is it just me that finds the situation rather ironic considering the fact that unfair taxes levied on emigrant citizens was the main reason for Americans to seek independence from the British in the first place?
Disclosure: I am a United States citizen (by facts of birth) and my wife is a United States citizen (by naturalization). Both of us have lived and worked both in the United States and as long-term expatriates in another country (Taiwan, where my wife is from). During both of my stays in Taiwan, I went through the trouble of filling out United States tax forms each year related to income that was wholly derived from my employment in Taiwan. I'm a dot-the'i's and cross-the-'t's kind of guy that way. I make sure to follow the laws I know about, the better to protest against laws that really upset me.
The saying in the newspaper business is that "'Dog Bites Man' is not news, but 'Man Bites Dog' is news." So we see news stories from time to time with the surprising story hook that some people with United States citizenship give up their citizenship, usually for tax reasons. But this is news precisely because it is very unusual. This influences the decision-making about citizenship of only tiny numbers of Americans. Most United States citizens are happy to have their citizenship, even if they live overseas for years at a time, as some of my friends and several participants on Hacker News do.
There are still probably 100 million or more people around the world who be glad to immigrate to the United States.[1] On the basis of net immigration among all countries in the world, the United States is still by far the winner in gaining capable people from other countries on a net basis.[2] The exceptional cases of persons with high earned income overseas who come out ahead economically and dipomatically by renouncing United States citizenship are still exceptional cases. Most United States citizens abroad are quite happy to have the passports and the consular representation they have as United States expatriates, as contrasted with being citizens of the country they work in or expatriates with some other citizenship.
Nobody is saying or implying that American expatriates are, as a general rule, renouncing their citizenship. The issue is that a nontrivial number of American expatriates are being incentivized to renounce their citizenship, to the point where some of those feel they have no choice but to renounce. It's an unintended consequence of a law that affects a minority, and this is precisely what news media should be covering. To dismiss the article because "most citizens are happy," and to set up a straw man argument about immigration into the United States (a phenomenon completely unrelated to the reaction of non-US banks to US policy), would likely be seen as offensive to that minority which was forced to renounce citizenship.
Nobody is saying or implying that American expatriates are, as a general rule, renouncing their citizenship. The issue is that a nontrivial number of American expatriates are being incentivized to renounce their citizenship, to the point where some of those feel they have no choice but to renounce.
Numbers matter in public policy discussions. I understand your opinion that the numbers of Americans who have renounced citizenship for tax reasons is "nontrivial," but I hope I make clear, as an American who has lived overseas among many other expatriate Americans, and who still keeps up regular contact with many expatriate Americans who derive all their income from overseas work, that I think the reported numbers are indeed trivial. As an American voter and taxpayer who cares deeply about the future of the United States and who knows first-hand about the trade-offs involved in living and working overseas, I'm not seeing a crisis here. I'm not seeing the numbers here I would need to see to advocate a change in current policy, even if other people kvetch about the current policy.
"Steep penalties add muscle to the law. If a foreign bank – not just in Canada, but anywhere – fails to report even a single US citizen as a customer to the IRS, the US Treasury department would withhold 30% of the banks’ US income as penalty."
What do they mean "US income"? How do they enforce it?
Let's say there is a tiny bank in Lichtenstein. It has two customers. Me, with $10,000 in the bank; I am a U.S. citizen. And the Sultan of Brunei, who deposits $1 billion.
I tell the banker to keep my cash in the bank in Lichtenstein, and I use that bank account to pay my rent, buy food, and other ordinary things.
The Sultan of Brunei tells the banker to take all of his money and plow it into the U.S. stock market.
Tiny Bank of Lichtenstein takes all of the Sultan of Brunei's money and plops it into the U.S. stock market. Buys Google and Apple stock and all that fun stuff.
One day the Sultan of Brunei calls up the bank and says "I would like $1 billion of my money back because I need spending money." The banker sells a bunch of Apple and Google stock until there is $1 billion of cash ready to wire back from New York to the Sultan of Brunei's bank account in Lichtenstein so the Sultan of Brunei can spend his own money.
The Sultan of Brunei, by the way, is not taxable in the U.S. on the capital gain that was made when the banker bought him Apple shares at $75 and sold those shares at $100.
If Tiny Bank of Lichtenstein has the right kind of paperwork in its files about me -- its only U.S. citizen customer, with a trivial amount of money in his bank account -- then the Sultan of Brunei's $1 billion will be wired from New York to Lichtenstein with no problems.
If Tiny Bank of Lichtenstein does NOT have the right kind of paperwork in its files about me -- its only U.S. customer -- then the Sultan of Brunei's $1 billion will face a terrible fate. Thirty percent of that $1 billion will be withheld, and 70% of the money will be wired to the Sultan's bank account in Lichtenstein.
The Sultan of Brunei only gets $700 million in his account. He is grumpy and yells at the banker.
Key metaphysical insights:
1. The 30% problem is imposed on gross money leaving the United States. It has no relationship to whether that money is taxable or not.
2. The U.S. government is threatening the customers of foreign banks with financial loss as a method for forcing the foreign banks to do its bidding. It is not too far off from suggesting that the continued health of your wife and children might be in jeopardy, so why don't you just do me this little favor.
3. If the bank looks at its customer base, who are they going to throw under the bus? Answer: me, the U.S. customer. My presence as a customer creates enormous risk -- risk of penalties payable to the U.S. government, but more importantly a risk that the bank will become unattractive to the Sultan of Brunei. And they don't want to lose the Sultan of Brunei as a customer.
This is why FATCA is so evil. And this is why Americans abroad are increasingly willing to give up their passports.
EDIT. There is a reporting threshold -- foreign banks don't need to report small account holders like me. Adjust my little story to pretend I put $100,000 in the bank. Or adjust my little story to assume -- correctly -- that a bank account that has $10,000 in it today (and is thus fully compliant with FATCA nonreporting) might have $100,000 in it tomorrow and land the bank in a metric tonne of compliance shit.
Why should the US be obligated to let this foreign bank do business in the US and operate on the US stock market, if this bank refuses to comply with US tax laws and money laundering laws? There's nothing stopping this bank from operating on a European or Asian exchange instead. If they want the benefits of working with the US system, the US is totally within its rights to impose rules on that.
Do you have more information on this ? If I understood you correctly this would have severe repercussions for foreign investors.
Suppose you are a foreign investor, what can you do to protect yourself ?
You don't do business with the USA. And increasingly, that's what they are doing. It's a small effect now since these are relatively new laws, but they are growing every year, and their impact will ramp up exponentially.
Probably if the bank itself files a US tax return. I don't know if they'd be able to enforce it on a strictly local bank that only does business outside the US, but a lot of banks are multinationals.
They managed to close down Wegelin Bank which operated inside Switzerland only. The US Gov probably threatened to arrest employees or something like that but officially the bank only published generic reasons about "pressure" for the closing.
What benefit do banks get for being multi-nationals exposed to every country's laws instead of just doing one bank per country? I thought that this was the norm for regular businesses.
Banks operate as "one bank per country" (actually, per currency), as the only way to hold e.g. USD is to be incorporated on US soil. However, these are just subsidiaries, owned by the multi-national corporation. Any country can say "comply to our rules or don't do business here", but only a few countries are lucrative enough to actually have any power over foreign subsidiaries.
What do you mean by "the only way to hold e.g. USD is to be incorporated on US soil"? I have some USD and thankfully have no relation to the US. Do you mean bank regulations? That seems to contradict for example Lloyds Bank in the UK having current accounts in USD.
It's illegal (one of the missions of US Secret Service is to ensure that there are no other currencies used in the US, and they have cracked down e.g. on Las Vegas casino tokens being used in surrounding restaurants to pay for drinks).
I meant for non-US banks. What stops "London" from setting up its own USD clearinghouse and having non-US banks start using that? Simple pressure from the US?
Possibly. Basically, the US can force the banks to do what they want, because the ability to retail within the US is worth so much. So either they, or the banks they work with, could be pressured to comply.
AFAIK, those USD accounts are actually opened at a US subsidiary of the foreign bank. Only US banks can get support of the US banking system (electronic transfers, overnight interest rates, loans). While you could run a USD bank abroad, it would have to be a mostly cash-only operation...
My wife and I had tentative plans to buy a place in Costa Rica, but put the plans on indefinite hold. FATCA was a consideration. It is now a pain in the ass for foreign banks to have USA citizens as customers.
Bill Clinton, way back when, signed a bill that would confiscate people's money, over a certain threshold if they renounced their citizenship (money that had already been taxed). My wife and I certainly do not want to renounce our citizenship, so that is not an issue, but spending a lot of time in a foreign home without a local bank account is a nuisance.
I understand the motive behind FATCA (our government needs every bit of revenue it can get, except of course from corporations and the super rich :-) but FATCA is inconvenient.
edit: that is confiscated a certain, sizable percentage of money, over a threshold
Precisely. Cases like this demonstrate exactly why democracy is meaningless when paired with an unrestrained capitalist system. Money completely triumphs votes in every policy issue. Income taxes are significantly higher than capital gains tax, and tax evasion becomes exponentially easier as a function of capital.
Such is life. It appears the mean human society has always tended towards oligarchy. If you can't beatem, joinem?
Even worse, if you are a non-american living in the U.S., you are subject to the same rules. I'm foreign for immigration purposes, but the IRS is happy to claim me as a USian.
Portugal just ratified the Convention on Mutual Administrative Assistance in Tax Matters. Basically, the convention is an agreement pursuant to which Portugal agrees to use its own courts and police to collect unpaid U.S. taxes from U.S. citizens living in Portugal.
FACTA is one of those laws that makes me cringe. It was attached to a jobs bill and passed under the veil of popular support for going after supposed tax scofflaws that hold money in overseas accounts. In reality it was just a power play to further extend the government's reach into peoples' personal lives, evidenced by the absurdly low reporting requirement for over-seas accounts with more than $50,000.
I wonder if there will ever be a time when there is a marketplace of citizenship. There are plenty of non-americans who want to become US citizens or immigrate legally. And at the same time there are US citizens going the other way.
An example could be an Italian wanting to move to the US because he works in Tech and a US citizen wanting to move to Italy because he works in Fashion. A marketplace would allow the two to work out a citizenship swap, with the necessary immigration paperwork.
In my view it is a win-win because
a. The immigration is two way.
b. In a global economy we can expect more and more people to move across countries. This service would facilitate that
c. The immigrants would want to do such a thing out of real interest in improving their lives and thereby the lives of their chosen country.
Given that Passports are a fairly new invention that's about a 100 years old, (thanks to the French and Germans just before WWI), I don't see why it can't be created.
The whole point of citizenship is that it is a sort of legal contract of sorts between the would be citizen and the rest of the citizens. It's not a simple matter between two people.
If such a marketplace were to be legally implemented it should be far more complicated than a simple swap of citizenship between two people. Even then, the liquidity of citizenship would undermine its value, for better or worst.
If there is a marketplace then it's value will be determined by that market. If people can move into apartments and can be interviewed for it, the same could apply here. Obviously, I haven't thought this out completely and naturally there are all sorts of complications, but in reality, the question is - why can't people freely migrate from country to country? Naturally there are costs involved, a legal bearing, maybe even a quarantine timeline, but it should be possible. People did that all the time until the 20th century and therefore, it's an artificial barrier that's been put up.
It seems like expat Americans need a political lobbying group to watch their interests. It would seem like large, international companies might have at least a passing interest too, as they might want at least some fraction of american staff to be posted internationally.
The two major political parties have organized themselves for citizens outside the United States but predictably they have other drums to beat. The D and R debates tend to be indistinguishable from the Itchy and Scratchy Show. The ACA is even-tempered and contains both D and R members.
It's part of a broad government push to repatriate American funds into American banks. There are similar regs coming (proposed?) related to Americans owning foreign corporations. All the same playbook; just keep funds on-shore, in this case by making life miserable for foreign companies that deal with American money.
> It's part of a broad government push to repatriate American funds into American banks.
Not exactly. US government wants to repatriate taxes earned by American people and capital abroad and making foreign banks accountable to US is part of making that enforceable.
On-shoring of dollars into US accounts because they can't be kept easily abroad is unpleasant side effect. When US dollars leave US, economically it is the equivalent of the World giving US treasury an interest free loan. The return of those dollars is essentially a repayment of that loan and acts as inflation economically. This could be useful, but the US government already has a direct lever on the quantity of dollars in the US economy through the FED.
To summarize, US Gov only wants the return of dollars that it will receive as taxes, but by all means don't bring back the rest.
If I understand correctly, the law is aimed at banks to disclose assets of americans with more than 50k in savings, the banks are overreacting and not handling accounts of any americans as a result. So I wouldn't say the law targets the average Joe (I know very few average Joes with $5k in savings, let alone $50k), but the banks are. Perhaps its a calculated move to get people upset with the IRS/Treasury to create backlash. I have no idea whether the root law impacts US corps.
I'm not using the word "overreacting" as a pejorative, but as a simple descriptive. The "overreaction" is simply doing more than the law requires of them. In this case, not taking americans as customers. The law does not require that of them, but they see it as too great a risk to their business.
I would also say that if the IRS is able to enforce their rules without war planes, then it is technically within their jurisdiction. The jurisdiction comes from a) legal jurisdiction within the USA and b) treaties that allow them to enforce laws beyond the USA.
It's 50k in "financial accounts", which includes retirement funds, and the financial institutions expose themselves to enormous penalties if they fail to report a single customer.
You don't really have to do anything. You're already filing US tax returns (I hope) and as long as you declare all foreign holdings over $10K, you're fine.
The kicker comes if you decide to move back home and either have a green card or US citizenship.
Note, that some of this (from FATCA) applies to visa workers who are not US citizen or greencard holders.
I work in the US on H1B, and I have been already declined to open an investment account in my home country in Europe, just because I was subject of US tax and have SSN. They told me that I'll be open the account once I move back to Europe and lose my US tax status.
I know, from news here in Canada, that they have introduce some delays that are preventing thousands of dual citizens to renounce their US citizenships until 2015 at the earliest. Furthermore, you can not renounce your US citizenship if do not have citizenship in another country. So, of course, most Americans can not do this and to use the population of the US as a relative base for your count is meaningless.
Good point. According to wikipedia (http://en.wikipedia.org/wiki/American_diaspora) there are 6.3 million Americans living abroad or ~2% of Americans. So perhaps ~0.04% of Americans abroad renounced citizenship annually. To put it in context, though, you'd need to know how that rate change over time and the size of the American diaspora over time.
So it's hard to judge how big or meaningful this story is. But anecdotally, I too am in Canada and I have definitely been hearing a lot recently from American friends who are finding US citizenship to be a PITA because of taxes.
Except they raised the fees for doing so something like %1,000 in the intervening period.
Remember, you don't get to just renounce. You have to petition the government for permission to have a hearing to renounce, and then you have to show up at this hearing -- in an embassy on foreign soil-- and give them reasons to let you renounce.
IF you say the wrong thing, they will not let you renounce.
The old adage "love it or leave it" forgets that we are, as far as the federal government is concerned, cattle, who can only wander off if we aren't too valuable. If you are worth several million, you will not be able to renounce without paying hefty taxes, and even then you probably need to rent some politicians with pull to influence the situation.
Which doesn't make sense at all. I should be able to renounce my citizenship via a simple statement on a public forum, such as a newspaper. If a citizenship is really just verification one has taken a certain oath to a country, why can't the individual invalidate that oath once they no longer respect it?
FWIW, Those in Canada with foreign funds must fill out pretty much the same information about these accounts as the US-ians have to fill out about THEIR foreign holdings. I guess each country knows all about the local holdings and really want to know about the foreign ones.
US-ian expats have to file taxes each year. Unless they live in a country with a lower tax rate than the US, they don't actually pay anything... Can't talk about anything but wage slaves, but it's like 3-4 hours to do the US forms each year. There's at least two ways to make the US taxes disappear - expat forms and foreign tax credit forms.
If you are an American living in the states you should care because bad tax policy is like a cold sore that never heals, and indication of a much deeper systemic problem. Because it is systemic, it will likely come around and affect you directly.
In many ways the tax code is the scab over the festering and oozing mass that is the budget that most represents the problems in the government that are going unsolved. If you want to find problems to solve, that is where you will find them.
Isn't your last bit the whole point? These people have very little attachment to the US but are still undergoing hardship due to US government policy due to what is basically a technicality of legal status.
For a more personal point of view, how sure are you that you will never, ever decide to retire to, say, Costa Rica?
First of all, I should have mentioned that I'm naive on the topic. From that point of view this seems like a very odd thing to be upset about, hence my question.
Second, for having little attachment, they seem more than happy to house a respectable chunk of money resting abroad. I find it odd that their new home is so lovely except they don't want their money there.
And to answer your question about say, Costa Rica, I guess I always assumed that if I were going to retire else somewhere it would be in such a way that I would commit to that location. I don't understand the idea of moving to another country and leaving all my shit back at the motherland. Again, I'm naive of this whole process, so that may be the silliest thing you read today. Sorry if it is.
Anyway, I get the impression that you don't understand the problem being discussed. It has nothing to do with leaving stuff back at the motherland. The problem is that the US is placing onerous rules on foreign banks that do business with US citizens regardless of where those US citizens actually live. Those rules are so onerous that many banks are deciding that it's easier to just refuse to do business with any US citizen.
To take the example of retiring to Costa Rica, you say you'd commit to that location. Presumably that implies putting your money in a bank account in Costa Rica. The problem here is that a Costa Rican bank is likely to refuse to open an account for you because of these rules.
You can still be affected by this even if you are completely disentangled from the US in every way aside from not having explicitly renounced your citizenship. You could, I believe, be affected by this even if you never touched US soil, for example if you were born and raised in a country that allows dual citizenship and inherited US citizenship from an American parent. Of course, in that scenario, it's much more reasonable to renounce your US citizenship.
For one, Americans living abroad and establishing business relationships seems like it would be a component in increasing exports from America, reducing the trade deficit.
Perhaps. But I'm not convinced this new law would have any effect on the scenario you describe. Money is getting pretty good at crossing borders, and the people this mostly effects are not those in the position to put a dent in the trade deficit.
The individuals could be working for large multi-national corporations and still be employees affected by this problem. It's not a sole deciding factor, but if it just adds a little friction in some business options (e.g. hey, who do we have whose willing to go overseas for a year and setup our foreign office) vs others, then it can still affect the needle.
“I feel about the same obligation to file US tax papers as you would if the supreme court of Uruguay all of a sudden decided you were a citizen and had to file a tax return there,” he tells the Guardian.
By the way, Uruguayan citizenship is VERY easy to acquire. American expatriates (and dollars :) ) welcome here :)
Edit: easy as in requirements. There's a lot of paperwork involved.
http://nomadcapitalist.com/2014/03/09/top-5-best-second-resi...
http://flagtheory.com/citizenship-in-uruguay/
"It will take approximately 3 years for a married couple, with a good amount of time spent in country. For singles, it will take 5 years – with a similar amount of time in country. This makes Uruguay more attractive for married couples rather than a single applicant.
Uruguay wants you to prove your residence by documentation – sometimes odd documents such as a doctor’s appointment slip, a library card. The idea is that they really want you to prove you are actually living in the country. This documentation is again, not always what you might expect – so document everything and when in doubt – shoe box it.
After you have received permanent residency, you should talk to an abogado about citizenship and travel document options. Again, permanent residency is required to be able to receive any kind of travel documents. Further, a cedula is somewhat considered a travel document as well and can allow you to get around South America in many instances.
Strong Travel Document
A Uruguayan passport is one of the strongest in the world. Under this passport, you can visit Europe visa free, and most Uruguayans have a 10 year American visa."