US expats are giving up their passports in record numbers – but how do they go about renouncing their American citizenship for good?
Last year, more than 4,200 Americans handed back their passports and the trend is for more disgruntled expats to desert their homeland in favour of exile as well.
The number of unhappy expats was 20% up last year on 2014 – and since 2010 the number has steadily risen from just over 1,000 to the current level.
The reasons for giving up US citizenship are not published, but many suggest that the Foreign Account Tax Compliance Act (FATCA) is to blame.
FATCA demands overseas financial institutions report information about accounts and investments controlled by US taxpayers to the Internal Revenue Service (IRS) each year.
Renouncing US citizenship
Although expats are allowed an account balance of $200,000 before triggering a FATCA report, many wealthy Americans have discovered the IRS is finding new ways to tax their pensions and investments.
They are also unwelcome at many foreign banks who no longer want the bureaucracy that comes with US customers.
Renouncing US citizenship takes some time and is costly.
Not only is a $2,350 fee payable to the State Department in Washington, but the IRS wants to see five years of tax returns, plus a couple more years after giving up citizenship to make sure the last chance to tax someone to within an inch of their life is not missed.
Giving up American citizenship also means booking and going through a ceremony.
The American passport holder has to stand before a US consular or diplomatic officer and swear an oath of renunciation.
All this takes place at a foreign embassy or consulate – not in the USA.
The State Department warns that anyone planning to renounce their US nationality should seek a foreign nationality prior to swearing the oath or they could become stateless. This would stop them travelling between countries as they would have no passport.
The law also makes clear that renouncing citizenship to escape tax liabilities or military service will not wash – and neither will giving up a passport to avoid prosecution.
The final indignity for a US expat is that their names are published on a public register after the renunciation ceremony.
Giving up a US passport is not a step to lightly take for an expat.
Once the passport is ripped, there is no going back. Renunciation is irrevocable unless the citizen is under 18 years old. If they are they have a last chance to remain American.
After their 18th birthday, they have a six-month window to apply to become American once more.