The effects of FATCA?

For more than 10 years, I have been helping clients to obtain German citizenship. Those who have German parents, grand-parents or further removed ancestors either are German already (often without knowing it) or eligible for naturalization under less strict conditions than other applicants.

Those who have no such family ties have to meet a set of criteria for naturalization, similar to that in most countries: residence in Germany between 3 to 8 years (although there is an exception to that), German language skills, a citizenship test, lack of a criminal record, the ability to support yourself financially and so on. Regular stuff, nothing surprising.

But then there is one thing where German citizenship law is rather old-fashioned: it requires many applicants to give up the citizenship which they already hold. Of course there are a number of exceptions to this, for law needs to remain complicated in order to sustain thousands of my colleagues.

For clients from Ghana, Haiti or Pakistan, this usually doesn’t pose a problem. But until 2010, I had never had a US-American client who would have given up their citizenship, even if they wanted to live in Germany or Europe for the rest of their life. An American passport seemed to be something sacred, not merely a travel document that you fill with stamps.

passport cut in half

This is actually not how you renounce your citizenship.

This has changed in the past couple of years. There still aren’t many, but I receive a steady trickle of e-mails from US citizens who wish to obtain German (or any other European) citizenship and who don’t mind losing their US citizenship in the process. Apparently, this is part of a wider trend. In 2014, a record number of 3,415 Americans renounced their citizenship, a sevenfold increase compared to a decade ago. And this is just the number of people of whom the US Treasury Department knows.

The timing and anecdotal evidence suggest to me that it does have something to do with the Foreign Account Tax Compliance Act FATCA, which requires foreign banks to report accounts held by US citizens to the US Treasury. There is more paperwork, checking and reporting involved, both for the US citizen and for the foreign bank. Some banks in Europe have reportedly told US citizens that they won’t open bank accounts for them anymore because of the paperwork (and possible criminal and civil liability) involved.

Unlike most other countries, the US taxes its citizens’ income regardless of where in the world it is earned. You may think of that what you want (I wouldn’t like it myself), but if there is an obligation to pay taxes, I can understand that the Treasury wants to follow up on that and try to combat or at least limit tax avoidance. I wish some other countries’ treasury departments would be only half as tough.

We should also put things into perspective: 779,929 people got naturalized in the US in 2013.

About Andreas Moser

Travelling the world and writing about it. I have degrees in law and philosophy, but I'd much rather be a journalist, a spy or a hobo.
This entry was posted in Economics, German Law, Immigration Law, Law, Politics, USA and tagged , , . Bookmark the permalink.

20 Responses to The effects of FATCA?

  1. Götweren Yhdynnän says:

    How many radical islamists did you bring into our Europe?

    • How many radical Islamists did your government / the EU bring into “our” Europe would be a more appropriate question I think. Or even better how many does Turkey facilitate into Western Europe. Turkey has been exporting its problems to Europe for generations including radical Islam. A few tax savvy US citizens is hardly an accurate explanation for the increased Radical Islamisation of Western Europe. No?

    • Looking at the European ISIS recruits it seems that Europe is exporting more radical Islamists than it is importing.

  2. john621 says:

    Sometimes it can work to your advantage. I live in Ireland but have a Green card. My wife is a us citizen, and we are in a situation where we filed our us taxes and actually got money back in the form of a credit without having set foot in the USA or earned any money from a us company. Always worth checking with an that specialises in non resident taxes.

  3. Gaeleigh says:

    It makes very little sense for most Americans to become European citizens for tax reasons considering generally Europe is more socialistic thus higher taxes. Plus Americans aboard earn almost the first $100K of foreign income tax free. It a great deal to be an American living in Europe indeed. The looming euro/dollar parity makes the prospect even more attractive.

    • Bill says:

      But it does make sense. Having a US passport does not exempt you from paying taxes where you live, it merely adds onerous and possibly expensive reporting requirements to the USA and possible additional taxes. Yes they have a 100K or so of EARNED income exempted from US income tax, but what about the many other forms of income and gains? For instance, an American sells his UK home tax free in the UK, then along comes Uncle Sam demanding a slice of any capital gain! What about pensions and tax efficient savings schemes in many European countries that are considered “foreign trusts” by the USA and taxed? What about the practicalities when banks, insurance companies and mutual funds will not touch you with a bargepole because of FATCA? And god help you if you make a mistake on the complex paperwork, because the fines are catastrophic. What about when your employer refuses to promote you to a signatory position because the firms bank then has to report the companies accounts to the USA? For the UK, they just passed a law requiring all employers sign up their employee to a pension scheme and pension schemes, with their financial complexities don’t want Americans! For anyone who chooses to live anywhere other than the USA, US citizenship has become nothing short of toxic.

  4. Jane says:

    I read that it may be possible to keep your first Passport, if you can show that there are significant reasons for it. I am Australian, with family, friends and reasonable aud in Australia.

    However I would like to qualify as a doctor in Germany, so that I can practice in Europe (Germany / Switzerland) – not for the money but because it offers better career opportunities and I love living in the Black Forest. I am studying German. A pass in the DSH will give me a university place, following which I will sit the State Medical Exam, do a prac year and be granted a work permit.

    I was offered permanent residence, but I declined it because i was thinking of the high foreign tax i would have to pay in Australia. I was assuming that Permanent residence was referring to “for tax purposes” and at that stage I didnt speak German and the Auslanderamt employees spoke no English. I have 4 degrees, IT, Chemistry, finance with first class honors and 6years of medicine (without sitting the final exams – because then i couldnt sit them in any other country and would not have good career prospects in Europe). I have also been a university lecturer and worked in medico legal for a spinal surgeon.

    I would like to keep my Australian passport, because the interest rate on savings is higher. And because I am Australian. Even though It does not offer any other advantages. It is probably a stupid choice.

    Would it be possible for me to keep my Australian passport if I was granted a German one?

    And , since I dont want to get married to get a German Passport, how long would I have to wait to be able to obtain a German passport?
    – considering that I speak almost excellent German :) (apparently, very good for a foreigner) I am pretty much integrated (except that I dont consider offal a delicacy), and I would be working as a doctor in Germany and have full financial independance.

    Being a non-EU citizen makes everything very difficult in Europe.

    In Australia I got malignant melanoma, so I prefer to stay out of the sun, and better treatment options are available in Germany / Switzerland. (which I pay for out of my savings)

    thanks for your time

    PS I loved reading about your adventures to the abandoned village etc. I was expecting there to be some dead bodies somewhere, maybe they were in the servants house that you didnt visit.

    Jane

  5. Guest says:

    I’d love to renounce my U.S. citizenship, but don’t want to pay the $2,300 fee to do so because I believe it’s unconstitutional. Is there something I can do to get around it?

    • 1) Maybe, but a lawyer will cost you more. :)
      2) Do you have any other citizenship?
      3) Which clause of which constitution do you feel is violated?

      • Guest says:

        Sorry for taking so long to reply:

        1) I can afford a lawyer. It won’t be cheap, but I’m concerned about the principle of being able to renounce your allegiance to a country without penalty if you no longer believe that you could continue being loyal to it.

        2) Yes, I do. The country where I was born and to which I’ve returned and have been living in for over ten years.

        3) I think the $2,300 fee violates the Fifth and Fourteenth Amendments to the Constitution, which prohibit denying someone due process. And such a prohibitive and arbitrary tax, which was raised from $450, is tantamount to denying due process. It also violates the Eighth Amendment, which prohibits cruel and unusual punishment. Increasing the exit fee fivefold is cruel and unusual. (I’m not a lawyer, so perhaps you can enlighten me on this.)

      • 3) I see a grave misunderstanding of what the due process clause means.
        And if execution through dubious poison mixes, electric current and gas chambers is not considered “cruel and unusual”, then you can guess what a court would say about a fee which is not even a fine.

  6. Gman says:

    I have an friend who is an German citizen, who was married to an u.s citizen for 12 years and lived in u.s and had an child during the marriage but her husband passed away and u.s made her and her son return to Germany,she had never got u.s citizen while she lived here and never thought this would happen! Her son from the marriage was born in Germany and then moved with them to the states . Do either of them have the right to live as u.s citizen in u.s without giving up their German citizenship?

    • I am not an American but a German lawyer, but a child born to two parents of different citizenship should have received both citizenships at birth.

      • Pat says:

        The US father needed to apply for the “birth aboard” certificate for his son, as the child was born in Germany. It isn’t automatic.

      • Citizenship and a certificate certifying citizenship are not to be confused.

      • Pat says:

        I have done this with my own child. The certificate gives your child a SSN#, and when you apply for your child’s passport, you need the certificate of birth aboard to complete the application (the counsel asks for it.) The foreign country birth certificate is not enough on it’s own for passport issuance.

  7. DW Griffing says:

    Really, all this double taxation and the feverish campaign to uncover potential tax and fee money by the Yanks is because, like so many who believe they are superpowers and work towards controlling the world (read conquer), their grandiose ambitions exceed their pocketbooks more and more every year. Not only are they destroying ‘the pursuit of happiness’ generating more financial burden for their own citizens but they are destroying the ultimate quality of life for each and all the populations of whose countries they bomb, resource-pillage and destroy hundreds of years of governmental and societal foundations. And then when they’ve had their fill, they just abruptly disappear and generate a refugee exodus for the rest of Europe to try and deal with. Where do you suppose this runaway train is heading?

    • As someone whose country was liberated from a dictatorship by the US because we Germans couldn’t or didn’t want to do it ourselves and as someone who saw that the carnage and massacres in ex-Yugoslavia in the 1990s only came to a stop when the US intervened, I am not quite that negative.

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