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Old 08-21-2009, 01:56 AM
SeC SeC is offline
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Wink More US wealthy opt to surrender their citizenship


More US wealthy opt to surrender their citizenship

17 August 2009 - David Bain

As offshore havens comply with transparency demands, a growing number of ultra-wealthy Americans are handing back their passports.

Private client lawyers and relocation specialists are reporting a surge in wealthy Americans living abroad who are prepared to give up their citizenship to avoid the scrutiny of US tax authorities.

Although such a move means they have to pay an exit tax, lawyers say this is a price people have become more willing to pay this year, now the fall in asset values has reduced the size of the imposition.

Jay Krause, a partner at private-client specialist law firm Withers, said: “The number of inquiries from US citizens wanting to expatriate from their citizenship has increased rapidly in the last year.”

The level of interest is set to increase following the tax disclosure deal between the US Government and UBS of Switzerland, involving the names of 5,000 alleged US tax evaders being handed over to the authorities. The UK concluded a tax deal with Liechtenstein last week.

Because of this, many ultra-wealthy individuals who have chosen to become stateless now cruise outside coastal waters in their mega-yachts in the belief that if they stay on the move, tax authorities will not be able to catch up with them. One analyst who did not want to be named, has estimated the number of stateless tax evaders amounted to a few thousand.

This implies the quantity of money outside the grasp of global tax authorities could be trillions of dollars.

Under US tax laws, the worldwide income of any US citizen or resident is subject to tax. The US is the only country in the world that requires its citizens to stump up, no matter where they live.

Krause said current economic conditions are making it more conducive for Americans to contemplate paying exit tax demands from the US Internal Revenue Service. “The mark-to-market provision in the Exit Tax from the IRS is a big incentive,” he said.
In the final months of the Bush administration, the US Government introduced a package of tax reforms that included an amendment to the exit tax on US citizens and long-term green card holders who expatriate the US.

The tax allows US citizens and permanent residents wanting to renounce citizenship or permanent residency to pay a one-off income tax on gains over $600,000 (€420,000). All assets beyond this amount are valued at mark-to-market.
The exit tax allows a clean break from the US tax system from the date of expatriation without imposing the previous 10-year period after expatriation where tax rules used to apply – another big incentive, say lawyers.

One of the other benefits of the amended exit tax is that a former US citizen who has expatriated will be able to travel to the US without his income becoming taxable. Under the previous exit tax this was not possible.

Krause said many people looking to give up US citizenship are accidental Americans. These are either those born in America when their non-citizen parents might have been living there for a short period, or the offspring of an American parent living abroad. Both categories qualify automatically for US citizenship.They may not take up a US passport, but they will still be subject to US taxes unless they expatriate. “More and more accidental Americans are looking at the fall in asset prices in the last year and taking up the option to expatriate,” said Krause.

Official figures on US expatriate cases reported by the IRS every quarter show about 90 people giving up their citizenship in the first half of 2009.

But one prominent lawyer, who did not want to be named, said: “There has been for some time a view that the IRS has been under-reporting these numbers.”

The IRS denies this. Some argue the figures are more or less meaningless. John Gaver, who edits right-leaning website Action America, said in an article published on the site: “What these lists fail to show is the vast and increasing numbers of wealthy US citizens who are just ‘dropping out’ – taking all of their wealth and leaving the US without renouncing. They just disappear off the US tax rolls and appear on some other country’s tax rolls.”

Anecdotal evidence also suggests there has been a surge of inquires from Americans looking at taking up citizenship of another country.

Christian Kälin, a partner at residence and citizenship planning consultancy Henley Partners, said his firm has had a big rise in such inquiries.

He said: “Tax reasons might be the biggest reason why US citizens will want to drop their passports, but security issues will also influence their decisions.

“For example, we saw a huge surge in inquires from US citizens contemplating acquiring an alternative passport after the Mumbai killings.”

The terrorist attacks in Mumbai last November targeted Americans among other foreigners.

Kälin said citizenships of the Caribbean Islands and western European countries prove to be the most popular for ex-American passport holders.

He said: “St Kitts and Nevis is the favourite alternative citizenship option for US citizens. Many will also be looking at Austrian citizenship, but it costs the most.”
St Kitts and Nevis is favoured for its perceived security, while Austria is one of the few European countries where it is possible to purchase citizenship.

Typically, it will cost $400,000 to secure a St Kitts and Nevis passport, whereas Austrian citizenship might run into several million euros.

More US wealthy opt to surrender their citizenship

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Old 08-21-2009, 07:51 PM
BlueAngel BlueAngel is offline
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Default Re: More US wealthy opt to surrender their citizenship

Good job, SEC.

I'm proud of ya!

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